Financial Regulators Eye Tweaks to Major Banking Rules

A group of independent regulators on Thursday told members of the Senate Banking Committee that they think their agencies should make a range of changes to major regulations related to bank supervision enacted in the aftermath of the 2008 financial crisis.

Most notably, the officials from the Federal Reserve and the Office of the Comptroller of the Currency said they’d like to see changes to the “Volcker rule,” a key element of the 2010 Dodd-Frank Act that curbs banks’ use of their own funds for high-risk trading.

Fed Gov. Jerome Powell, who currently oversees the central bank’s supervision efforts, said the Fed can unilaterally tailor the Volcker rule by “making the rule less burdensome” for large and small banks while still meeting the spirit of the regulation. When asked for details, Powell said the Fed could achieve this in part by changing the definition of funds that are covered by the rule.

Additionally, FDIC Chairman Martin Gruenberg said the Fed and the FDIC both are looking at ways to “improve” the living will submission process.

That could mean replacing a current requirement that banks submit their plans for resolutions once per year with a biennial requirement, and making sure filings focus on “key topics of interest.” Submission requirements also could be eased for banks that are largely focused on domestic banking, Gruenberg said.

The regulators’ comments were welcomed by Banking Committee Chairman Mike Crapo (R-Idaho), who said their feedback was important as senators are “actively engaged right now in moving forward in developing this legislation.” Thursday’s hearing was the latest in a series of panels Crapo has convened to examine ways to craft bipartisan regulatory legislation aimed at promoting economic growth.

Democrats made it clear, however, that they will not support regulatory or legislative changes if they’re based on the most controversial recommendations outlined in a report on financial regulation that the Treasury Department released last week.

Sen. Sherrod Brown of Ohio, the committee’s ranking Democrat, said he hopes the regulators “don’t have that same bias” toward large institutions that he sees at Treasury when crafting their own regulatory changes.

Morning Consult