The FDIC’s proposed rule to require boards at banks with more than $10 billion in assets to establish risk management programs exceeds the agency’s statutory authority and represents a “significant departure” from existing governance principles, a group of 10 Republican House lawmakers said today.
The proposed guidelines would require boards at $10 billion-plus banks to create risk management programs “appropriate for the size, complexity, business model and risk profile of the covered institution.” In their letter, the lawmakers, led by Rep. Frank Lucas (R-Okla.), said the proposal contains three major flaws. First, it would fundamentally change the liability and responsibilities of bank boards of directors and senior management. Second, its requirements are inconsistent with most state laws regarding directors’ fiduciary duties. Third, it arbitrarily sets the asset threshold for covered institutions far below the thresholds for heightened standards under the other banking regulations.
“The internal processes required by the guidelines would make compliance functionally impossible,” the lawmakers said. “The guidelines would undermine sound risk management practices and introduce massive risk into the banking system.”
Earlier this year, ABA and 52 state bankers associations urged the FDIC to withdraw the proposal and instead explore releasing it as guidance rather than enforceable guidelines. Then in August, a group of 11 Republican senators also urged the FDIC to withdraw the rule, saying it would harm the safety and soundness of the U.S. financial system.
