Regulators lay out future needs, plans in testimony before Senate Banking panel

Regulators took a forward look in testimony Tuesday about recently enacted regulatory relief legislation, telling a Senate committee where they hope to go in coming weeks and months with their regulatory plans, and what more Congress can (or should) do them help them get there.

In testimony before the Senate Banking Committee, the regulatory supervisors from four federal financial institution regulatory agencies – the Federal Reserve, the Federal Deposit Insurance Corp. (FDIC), the National Credit Union Administration (NCUA) and the Office of the Comptroller of the Currency (OCC) – discussed their agencies’ implementation of this year’s Economic Growth, Regulatory Reform and Consumer Protection Act (EGRRCPA, S. 2155). However, they also dipped into where they are going next – or want to go.

Federal Reserve Vice Chairman for Supervision Randal K. Quarles told the panel that the Fed has “an important opportunity” to tailor its supervision and the agency’s regulatory framework to “be more risk-sensitive without sacrificing the increased post-crisis resiliency of the financial system.” He indicated the Fed should tailor regulation more broadly to “take into account the business mix, complexity and interconnectedness, and risk profile of banking institutions.”

NCUA Board Chairman J. Mark McWatters noted that the new law improved credit unions’ ability to serve their members, but other changes are needed.

“At the same time, technological and other advancements, including credit union relationships with fintechs and other third-party vendors, are changing the way financial services are provided,” he said. “While these developments can help credit unions meet the needs of all segments of their membership and communities, they also mean that credit unions and the NCUA must evolve to remain effective in the changing financial services landscape.” He highlighted a desire that Congress give his agency examination authority over third-party vendors comparable to the federal banking agencies, and for changes to the law to “open up access for more underserved households to credit union membership.”

Comptroller of the Currency Joseph Otting highlighted the agency’s efforts to update and reform rules implementing the Community Reinvestment Act (CRA), an anti-redlining law.

“A modernized framework would strengthen the CRA by encouraging more lending, investment, and activity where it is needed most – fulfilling the ultimate purpose of the CRA,” Otting told the committee. He said those goals can be achieved through more clarity in a variety of areas, including: CRA-qualifying activities; establishment of clear and objective measures to assess CRA performance; new thought of the concept of the “communities” that banks serve in a more comprehensive manner; and more. He noted that a public comment period on an advance notice of proposed rulemaking in those areas (and more) is open until Nov. 19.

FDIC Board Chairman Jelena McWilliams said her agency is focusing on improvements in transparency (particularly in communications), but also had specific areas of review in mind “that have not received recent or comprehensive public input.”

“One example is a comprehensive look at the regulatory approach to brokered deposits and national rate caps, which will include seeking public comment later this year,” she said. “The banking industry has undergone significant changes since these regulations were put into place, and we will consider the impact of changes in technology, business models, and products since the brokered deposit requirements were adopted.”

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