Fed’s community bank rep outlines steps taken to reduce reg burden, employ EGRRCPA

Reducing regulatory burden is “one of the most important ways” to help minority depository institutions (MDIs), a governor of the Federal Reserve Board said Tuesday, citing implementation by the agency of provisions in last year’s regulatory relief law.

In remarks to the 2019 Interagency Minority Depository Institution and CDFI Bank Conference, in Arlington, Va., Federal Reserve Board Gov. Michelle W. (“Miki”) Bowman described a number of proposals pending before her agency initiated by last year’s Economic Growth, Regulatory Relief and Consumer Protection Act (EGRRCPA, S. 2155), which she said included:

  • A community bank leverage ratio that would allow qualifying banks to opt out of a more complicated risk-based capital framework.
  • Raising to $400,000 the threshold for when an appraisal is required for a residential real estate transaction.
  • Narrowing the Volcker rule to banks engaged in riskier activities.
  • Raising the threshold from $1 billion to $3 billion in assets for banks that could qualify for an 18-month examination cycle.

She also said the Fed had raised the asset threshold to $3 billion for the Small Bank Holding Company and Savings and Loan Holding Company policy statement. “This change, which exempts small holding companies from consolidated risk-based capital rules, fosters local ownership of small banks by allowing more banking companies with limited access to capital markets to use debt in bank acquisitions,” Bowman said.

As for supervision, the Fed governor asserted that the central bank is reducing regulatory burden by conducting portions of exams offsite for community banks that prefer that option. “The Bank Exams Tailored to Risk (BETR) program identifies low-risk or, conversely, high-risk activities within state member banks and appropriately streamlines or expands examination work programs commensurate with the identified risk,” she said. “This minimizes the burden for banks that are well managed and directs supervisory resources to higher-risk activities where they are most needed.”

Gov. Michelle W. Bowman: Minority Depository Institutions