The top banking regulators appeared before House lawmakers today to answer questions on regulatory tailoring, debanking and other issues.
Federal Reserve Vice Chair for Supervision Michelle Bowman, FDIC Acting Chairman Travis Hill, Comptroller of the Currency Jonathan Gould and National Credit Union Administration Chairman Kyle Hauptman were peppered with questions on a variety of banking topics during a House Financial Services Committee oversight hearing. One question regulators were asked repeatedly is what their agencies are doing to better tailor regulation to bank size and risk.
“This hearing is about enhancing clear, tailored rules of the road, fostering competition and ultimately serving the best interests of consumers and businesses,” committee Chairman French Hill (R-Ark.) said in his opening remarks.
Among the hearing highlights:
- All three banking regulators pointed to ongoing efforts to revise regulatory thresholds and better tailor their supervisory processes. Committee members also pointed to ongoing legislative efforts, with Rep. Andy Barr (R-Ky.) suggesting that the Dodd-Frank Act’s Durbin Amendment – which sets debit card interchange fees – should be indexed to nominal GDP. “Because of the Durbin Amendment and some of these other regulatory triggers at $10 billion, [growing banks] have to rapidly expand their balance sheet and increase their presence in new markets and activities and new business lines to account for the additional interchange costs that they would face,” he said.
- In her opening remarks, Bowman said the Fed is currently seeking ways to more effectively tailor the merger and acquisition and de novo chartering application processes for community banks. “We are exploring streamlining these processes and updating the Federal Reserve Board’s merger analysis to accurately consider competition among small banks,” she said.
- The day before the hearing, the committee released a report on alleged debanking of cryptocurrency businesses during the Biden administration. The regulators said they have taken steps to reverse those actions, such as by removing reputational risk from supervision.
- Ranking Member Maxine Waters (D-Calif.) accused the Trump administration of trying to “get rid” of the Community Development Financial Institutions Fund. Bowman, when asked about the fund, said she supports the mission of CDFIs. “We definitely recognize the important role that CDFIs play in expanding access to capital and to financial services,” Bowman said. “The Federal Reserve continues to have a program that supports CDFIs from a technical perspective, which is called Partnership for Progress. And these are important investments that the Federal Reserve continues to make.”
Business groups seek bank capital rule reforms
In a joint statement submitted ahead of the hearing, the American Bankers Association joined the Financial Services Forum and 14 other business groups in urging regulators to modernize bank capital rules. “Specifically, common sense adjustments to Basel III Endgame, the GSIB surcharge, stress testing and leverage requirements will improve access to credit and reduce the costs of goods and services for American businesses and consumers, ensuring the U.S. economy can continue to thrive and grow,” they said.
“It has been more than 15 years since the implementation of heightened bank regulation, and it is important to take a comprehensive look to ensure capital rules are working in today’s economy as intended without constraining U.S. economic growth and competitiveness around the globe for the future,” the groups said. “Now is the time to modernize our capital framework to unleash economic growth for American businesses and consumers across the country.”
