Reg burden, CECL standard, ‘know before you owe’ rules top three reg complaints received by FDIC ombudsman last year

The “regulatory burden,” new accounting standards for expected credit losses, and issues related to “know before you owe” mortgage disclosures were the top 2018 complaints – or “constructive feedback” – received by the ombudsman for the federal insurer of bank deposits.

In what it said is its first report in almost 10 years, the Federal Deposit Insurance Corp.’s (FDIC) Office of the Ombudsman reported that 26% of the 342 complaints or feedback (“discussion items”) it received in 2018 were related to “regulatory burden” (which the public interest advocate’s office defined as “concerns that are broader than a specific regulation or involve a discussion of the impact of multiple regulations”).

FDIC pie chart of complaints
FDIC graphic

Among the complaints about regulatory burden: regulatory costs are excessive and not accompanied by offsetting increases in revenues; Home Mortgage Disclosure Act (HMDA) reporting requirements and credit union competitive advantages make it challenging for banks to increase their residential mortgage lending activities; regulations written for large banks hurt community banks by spurring mergers and making it harder for them to improve profitability.

The second-largest group of complaints (at 18% of all received) related to the “current expected credit loss” (CECL) accounting standard issued by the Financial Accounting Standards Board (FASB), and slated to take effect beginning next year for some financial institutions. Among the complaints: costs of implementation outweigh benefits to a community bank; the accounting standard requirements will not result in any material change in banks’ Allowance for Loan and Lease Losses balances; additional guidance, communications, and training on CECL are needed.

Other top complaints noted by the ombudsman’s 2018 annual report:

  • 16% related to Truth in Lending Act/TILA RESPA Integrated Disclosure rule (TILA/TRID) disclosures, particularly about their “time-consuming” and costly nature of disclosures, and the “major undertaking” of compliance training.
  • 15% related to Bank Secrecy Act (BSA) concerns, especially about “complex, burdensome” beneficial ownership rules for staff and customers, which “delay the opening of accounts and puts the bank in a position of ‘policing’ customers’ behavior.”
  • The remaining complaints were distributed among those about Home Mortgage Disclosure Act (HMDA) data collection (7%), clear marijuana-business banking guidance (5%), need to update Community Reinvestment Act (CRA) requirements (4%), and “other” (9%), including the methodology for calculating national interest rate caps and the definition of “core deposits” for brokered deposits rules.

On the other hand, the report also notes that 511 of the “discussion items” it received represented “positive or neutral feedback.”

FDIC Office of the Ombudsman 2018 Annual Report