The FDIC board today unanimously voted to advance a proposal to regularly adjust some of the agency’s regulatory thresholds for banks to keep pace with inflation.
The proposed rulemaking would update certain agency thresholds to reflect the cumulative inflation that has occurred since their initial implementation date or the last time they were adjusted. It would also establish automatic adjustments every two years based on the Consumer Price Index and allow the FDIC to adjust thresholds in intervening years if the cumulative change in CPI exceeded 8% since the most recent adjustment.
The FDIC is also considering alternative approaches for updating the thresholds, including using other indices to measure inflation, with today’s action being the first of a planned multiphase effort on thresholds. It will seek public input on the proposal for 60 days after publication in the Federal Register.
“These thresholds have not been raised in decades and present meaningful challenges for small institutions that have been scoped into the rule,” Hill said. “For example, small institutions in rural areas may experience difficulties attracting and retaining individuals with the requisite experience to satisfy the rule’s audit committee composition requirements.
“Today’s proposal is designed to keep thresholds constant in real terms by indexing thresholds for inflation,” he added. “It would mean the size of an institution scoped into an asset-based threshold would not change based on the changing value of the dollar.”
In a statement, American Bankers Association President and CEO Rob Nichols called the FDIC proposal a long-overdue step toward a more rational and modern bank regulatory framework.
“For many years, ABA has argued that arbitrary asset thresholds impose unintended constraints and costs on banks while making it harder for regulators to focus on the largest sources of risk — effects that are compounded when thresholds remain static over years and even decades,” Nichols said. “Just as important as indexing itself is ensuring that the chosen measure reflects structural changes in the banking sector and overall economic growth. We look forward to reviewing the proposal’s use of CPI and intend to explore alternatives such as nominal GDP or total bank assets.”
