Page 10 - Flipbook for non-members
P. 10
Summary of “Tailored” Regulation
Rep. Scott Tipton
SUMMARY
A bank or credit union is regulated now with a “one size fits all” approach whether it is a little $15 million
neighborhood bank or a large $2 trillion one. Regulators are leery of being too light on big banks, so the
same burden of regulation for the big guys is applied to every smaller bank in the U.S., imposing compliance
regimens and costs that are unbearable to many of them. This bill creates a way for regulators to fulfill other
statutory objectives and tailor regulations to fit the bank’s business model and risk profile.
KEY ELEMENTS
While fulfilling the objectives of the regulation or statute involved (safe/sound banking, consumer protection),
bank and credit union regulatory agencies (Fed, FDIC, OCC, NCUA, CFPB) would consider the business
model and risk profile of regulated financial institutions and tailor proposed and final regulations to weigh the
compliance impact, cost and liability risk. In doing so the agencies would consider the regulatory impact on
customer service, and the unintended consequences of regulations in the aggregate.
The five agencies would report in person and testify to the two banking committees of Congress annually on
their specific actions to comply with the bill. Within three years of enactment the five agencies would look
back and apply the standards to rules adopted in the previous five years.
CUSTOMER BENEFITS
Benefits to consumers include adjustments to appraisal and escrow provisions which would facilitate loans
not made now. Small businesses would see simpler, cleaner, faster and cheaper loan procedures. Deeming
loans in portfolio as compliant with QM and ATR would permit loans not otherwise made to low income,
small business, rural populations, retirees, recently employed… There are many more good outcomes.
The bill would benefit community banks, for example, on highly capitalized banks, privacy notices, call
reports, 18 month exam cycle, small servicers of mortgages, stress tests, Sub S treatments, SOX internal
control certification… Such major reductions in regulatory burden would save banks and their customers
great expense and hassle.
PROVISIONS
TAILORED REGULATORY ACTION – For any regulatory action occurring after enactment, the Federal
financial institutions regulatory agencies (Fed, FDIC, OCC, NCUA, CFPB) would
Consider the risk profile and business models of the institutions or classes of institutions
determine the necessity, appropriateness, and impact of applying such regulatory action
tailor such regulatory action to institutions in a manner that limits the regulatory compliance impact, cost,
liability risk, and other burdens as is appropriate for the risk profile and business model involved
consider the impact that such regulatory action, both by itself and in the aggregate, has on the ability of
institutions to serve evolving and diverse customer needs
weigh the potential unintended impact of examination manuals or other regulatory directives that work in
conflict with the tailoring of regulatory actions
disclose in each notice of proposed/final rulemaking how the agency has applied the bill’s provisions
REPORTS TO CONGRESS — The five regulatory agencies would be required to individually report in
person and testify to the House Committee on Financial Services and the Senate Banking Committee
annually on the specific actions taken to tailor the agency’s regulatory actions as required by the bill.
In addition the Federal Financial Institution Examination Council would be required to report in person
and testify to the same committees on differential regulation of similarly situated institutions of diverse
charter types and the reasons for such differential treatment
LIMITED LOOK-BACK APPLICATION — Within three years of the enactment the five Federal regulatory
agencies would be required to review all regulations adopted over the five years prior to enactment and
apply the requirements of this bill to such regulations
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