Fighting the Good Fight Against Overregulation

Every 10 years the federal regulatory agencies are required by law to review regulations to determine if any are outdated, unnecessary or unduly burdensome. The law requiring this process is the Economic Growth and Regulatory Paperwork Reduction Act (EGRPRA). Ten years ago a few meetings were conducted, but nothing came from this process. This year skeptical bankers and advocates have found it difficult to muster enthusiasm for the process taking place, yet the regulators appear to be taking this process much more seriously. Several regional meetings have been occurring throughout the country, and a number of bankers have been invited to provide testimony at these outreach meetings.

On Monday one such meeting was held in Chicago. In perhaps the most positive presentation at these meetings by a regulator, Dr. Lael Brainard of the Federal Reserve Board highlighted a list of areas that the Fed believes “hold the greatest promise to reduce undue regulatory burden, especially for our community banks.” Gov. Brainard detailed opportunities in the following areas: regulatory reports; small bank holding company policy threshold; Community Reinvestment Act; Bank Secrecy Act/anti-money laundering; expediting and improving applications; appraisal thresholds; simplified capital for small institutions; stress tests for regional banks; the examination cycle; and the Volcker Rule. These are certainly important areas for consideration of regulatory relief. Included in this list are several areas in which the regulators state they have already taken some action, or are in the process of doing so.

A caveat that winds through some of these issues is that legislative action may be required. So far that has not worked very well. Getting Congress to agree on anything at this point has proven to be elusive at best and impossible at worst. We need look no further than the current conundrum regarding the bill for regulatory relief in the Senate. And even if the Senate comes to an agreement, will the House ‒ which has taken a completely different approach ‒ be willing and able to act upon the Senate version?

While I appreciate Brainard’s recent remarks, and I do believe that the regulators are making a much better effort to comply with both the letter and spirit of the EGRPRA process, I fear that little will result that will have a meaningful impact on banks. Even as these efforts are taking place to delve into the undue burden cast upon the banking industry, the Consumer Financial Protection Bureau (CFPB) has released its proposed increased data collection of Home Mortgage Disclosure Act information, which goes well beyond what was mandated by Congress. The CFPB apparently did not get the memo regarding the already existing regulatory burden that government has lavished upon the banking system, which is the very reason that the EGRPRA process was enacted.

The bottom line is that bankers will have to continue to demand relief from the current overregulation of the banking business and fight to keep Congress from enacting any new laws that add to that burden. Despite the EGRPRA process, bankers will also need to be on guard to keep the regulators from continually adding to the burden. Success, to a large degree, is in our hands. This week two bankers from Indiana testified at the Chicago outreach meeting: E.G. McLaughlin, president and CEO of United Community Bank in Lawrenceburg; and David Findlay, president and CEO of Lake City Bank in Warsaw. We thank them for investing the time and effort to speak up on behalf of banking at this important meeting.

– S. Joe DeHaven

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