Tailoring regulation based on an institution’s size and risk profile is “at the heart of what we’re doing” at the Federal Reserve, Chairman Jerome Powell affirmed today during testimony before the House Financial Services Committee. Under his leadership, the Fed will continue to focus on reducing the regulatory burden for community banks, and “without losing any safety and soundness, try to make sure that our regulation is no more burdensome than it needs to be,” he said.
Powell pointed to several steps the Fed has taken in recent months to provide relief for smaller institutions, including reducing the scope and burden of the Call Report, reducing the frequency of exams and simplifying capital requirements, adding that “we’re committed to doing more.” He expressed interest in revisiting, among other things, the calibration of the supplemental leverage ratio and the application of the Volcker Rule.
He also acknowledged the effects of excessive regulation on the availability of credit and economic growth. “Small businesses create a lot of the jobs, and small banks have a disproportionate share of small business lending,” he noted. “We really want that credit to flow. We don’t want regulation to inappropriately create too much burden.”
Commenting on the broader economic conditions, he noted that the U.S. economy continues to grow at a solid pace, with GDP posting 3 percent growth in the second half of 2017, unemployment reaching a 17-year low, and inflation running just beneath the Fed’s 2 percent target. He added that the Fed’s ongoing effort to wind down its balance sheet is “proceeding smoothly,” and that he continues to anticipate gradual interest rate increases in the coming months.
