In a speech today, FDIC Vice Chairman Travis Hill outlined his policy priorities for the agency in coming months, calling for a return to fundamentals for bank supervision, a “more open-minded approach” to technology and bank-fintech partnerships, and a re-evaluation of how regulators implement the Bank Secrecy Act.
Hill noted the looming departure of FDIC Chairman Martin Gruenberg on Jan. 19, which is the day before President-elect Trump takes office. The change in FDIC leadership will result in a change in policy direction, with Hill touching on several changes he would like to see in coming weeks and months, starting with supervision. He called for bank supervision to focus less on process and more on core financial risks.
“[Supervisor] criticisms often have little bearing on a bank’s actual health or solvency, are a major distraction for examiners and banks, and are contributing to crushing compliance costs, particularly for community and regional banks,” Hill said.
Hill wants FDIC supervisors to be more receptive when banks approach them about adopting new technologies or innovation, saying bank experimentation “should not require time-consuming engagements with examiners or extensive approval processes.” He also wants the agency to rethink its oversight of bank-fintech partnerships, calling for fewer enforcement actions and more openness about the agency’s expectations for such ventures.
Hill addressed the issue of “debanking,” pointing to complaints from individuals in the cryptocurrency industry who claimed they had lost access to bank accounts as well as those who claimed they lost access for political or religious reasons. The first step to address such complaints is to re-evaluate how regulators implement the BSA, he said.
“While we all share the goal of ensuring criminals and terrorists are not using the banking system to fund drug trafficking, terrorism, and other serious crimes, the current BSA regime creates an incentive for banks to close accounts rather than risk massive fines for inadequate BSA compliance,” he said.
Hill also called end to the FDIC’s “misguided focus” on climate change and for the agencies to craft a Basel III endgame response that is roughly capital neutral. Hill opposed the proposal put forward by the Federal Reserve last year, which is currently on hold as regulators debate proposing the rule with significant changes.
