A new research paper released this week from consulting firm Oliver Wyman explores how proposals from various agencies can affect banks in overlapping ways.
“This is especially true when the regulations try to tackle common objectives, sometimes producing complex interactions. While in some cases the impacts can be additive, in other cases one proposal can offset certain costs or benefits of another,” according to the paper’s authors. “In still other cases, the combination of two or more proposals can produce outcomes not expected from any of them individually. Such interactions can result in unintended consequences, which are easier to identify when the full set of relevant proposals are assessed holistically. However, there is no broadly accepted framework that considers the impact of multiple regulatory proposals.”
The paper offers a framework to guide the analysis of the combined effects from multiple proposals, focusing primarily on the end result for consumers. It explores the topic from three angles: the direct effect of regulatory requirements, banks’ adaptation to new requirements and industry evolution.
To illustrate its findings, the paper applies its analysis to the combination of three major recent regulatory proposals and their common effect on credit/debit cards and checking accounts: the Federal Reserve’s proposed revisions to the Regulation II interchange fee cap, the CFPB’s credit card late fees proposed rule, and the interagency Basel III endgame proposal.
