Fed chair points to appraisal, capital proposals as made with smaller banks in mind

Proposals and actions on recent regulation – including those to ease appraisal standards in commercial lending, and simplify requirements in the regulatory capital rule – were made with an “abiding commitment to consider how our decisions affect institutions and the customers they serve,” the chair of the Federal Reserve Board told a conference of community bankers Wednesday.

Fed Chair Janet Yellen, speaking at the Community Banking in the 21st Century Fifth Annual Community Banking Research and Policy Conference cosponsored by the Federal Reserve System and Conference of State Bank Supervisors, Federal Reserve Bank of St. Louis, in St. Louis, told the group that she shares with it “an interest in seeing that community banks continue their vital role in their customers’ lives and in a strong and stable U.S. financial system.”

She said the Fed has worked to ensure that its regulation and supervision of banks are tailored appropriately to the size, complexity, and role different institutions play in the financial system. “For community banks, which by and large avoided the risky business practices that contributed to the financial crisis, we have been focused on making sure that much-needed improvements to regulation and supervision since the crisis are appropriate and not unduly burdensome,” she said.

She pointed to the two recent proposals by the Fed (in conjunction with other regulators, including the Office of the Comptroller of the Currency (OCC), and the Federal Deposit Insurance Corp. (FDIC)) on appraisal standards and the capital rule as examples. Both are out for comment.

“The Board of Governors, along with the Federal Deposit Insurance Corporation and the Office of the Comptroller of the Currency, has proposed a rule expanding the number of commercial real estate transactions that will no longer require an appraisal, allowing for a less detailed evaluation,” she said. “And just last week, the Fed, along with other regulators, took a significant step to reduce the regulatory burden on community banks and other smaller and less complex institutions by proposing to simplify several requirements in the regulatory capital rule.”

She said the Fed is “well aware” that community banks serve communities, businesses, and households that “are often underserved by larger institutions and offer more extensive and more personalized services than are often otherwise available.”

Fed Chair Janet L. Yellen At Community Banking in the 21st Century Fifth Annual Community Banking Research and Policy Conference