The FDIC will waive some requirements for large bank resolution planning and take steps to boost de novo bank formation, particularly in areas of the country without a local community bank, Acting FDIC Chairman Travis Hill said today in remarks at the American Bankers Association Washington Summit.
Addressing bankers from across the nation, Hill provided an update on key policy priorities for the agency in coming months. Among them was revising guidelines issued last year for resolution plan submissions for banks with more than $250 billion in assets, also known as “living wills.” He said the FDIC will continue to require resolution plans but will waive the expectation that banks identify and build their plans around a hypothetical failure scenario. “Instead, we will look for plans focused more specifically on providing the FDIC the information it needs to rapidly market the institution and, if needed, operate the institution for a short period of time,” he said.
As for de novo bank formation, one idea the agency is exploring is identifying scenarios in which certain applicants are subject to adjusted standards, such as with up-front and ongoing capital expectations, Hill said. An example would be an application to open a “traditional, noncomplex” community bank in an area of the country without a local bank. Sixty-eight million Americans live in counties without a community bank headquarters, he said.
The FDIC also is reevaluating how it processes deposit insurance applications from organizers proposing banks with “new or innovative” business models, Hill said. “For example, a fintech with a large number of deposit accounts may present less risk to the Deposit Insurance Fund if it becomes a regulated bank, rather than placing deposits at multiple banks through complex partnership arrangements.”
Other policy priorities:
- The FDIC will take a more “open-minded approach” to innovation, including with digital assets and blockchain. Hill noted the FDIC recently rescinded its prior guidance that banks first reach out to the agency before engaging with digital assets. “From the FDIC’s perspective, we should provide certainty that ‘deposits are deposits, regardless of the technology or recordkeeping deployed,’” he said.
- The FDIC and other banking agencies may revisit regulatory thresholds for banks. “After multiple years of inflation well above the Federal Reserve’s 2% target, it is worth exploring whether regulatory thresholds should be raised — and potentially indexed — to reflect inflation and/or macroeconomic and industry growth,” he said.
- Leverage ratio reform is something that is being actively worked on and “would expect action on in the relatively near future,” Hill said during a Q&A with ABA President and CEO Rob Nichols. “From our perspective, the focus is trying to reduce the bindings of the leverage ratio and trying to remove impediments to Treasury market intermediation.”
