BPI Comments on Regulatory Publication and Review Under Paperwork Reduction Act

Ladies and Gentlemen:

The Bank Policy Institute[1] appreciates the opportunity to comment on the first of four joint notices of regulatory review pursuant to the Economic Growth and Regulatory Paperwork Reduction Act of 1996 (“EGRPRA”) issued by the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation, and the Office of the Comptroller of the Currency (the “Agencies”).[2] In line with the aims of the EGRPRA review, this letter recommends changes to address “outdated or otherwise unnecessary regulatory requirements”[3] within the categories of regulations currently under review. More broadly, we also identify overarching regulatory and supervisory trends that impose unnecessary burdens and detract from both regulators’ and banks’ ability to focus on material risks to the safety and soundness of the U.S. banking system. As the Agencies consider revising unnecessary regulatory requirements, we urge you to ensure the supervisory and regulatory regime focuses on material issues affecting the safety and soundness of individual institutions and the financial system more broadly.

Furthermore, the scope of the EGRPRA review should be expanded. Increasingly, regulatory agencies are expanding their rulemaking to new areas, occasionally stretching beyond the limits initially contemplated by statute. This expansion often results in overlapping or duplicative regulatory requirements, complicating compliance efforts and hindering operational efficiency.[4] For example, the Consumer Financial Protection Bureau and the Securities and Exchange Commission have both issued rules or proposals that cover banking activities covered or impacted by regulations already imposed by the prudential regulators.[5] Including these agencies in the EGRPRA review process could aid in identifying and eliminating redundant regulations. The National Credit Union Administration has set a commendable precedent by voluntarily participating in the EGRPRA review. Other key regulatory agencies, specifically the CFPB, SEC, and Financial Crimes Enforcement Network, should consider following suit. To ensure the proper scope of EGRPRA reviews over time, Congress should revise the statute to formally include the CFPB, SEC, FinCEN, and any other relevant regulatory agency in the review process. Such an amendment would promote a more efficient, coherent, and less burdensome regulatory environment.

I. The Agencies should address several overarching trends that unnecessarily increase the regulatory burden on insured depository institutions and their holding companies without a corresponding safety and soundness benefit.

Compliance requirements disproportionate to material risk, overly demanding reporting obligations, complicated regulatory overlap, and barriers to competition and innovation all place needless burdens on banks operating in the U.S. without commensurate benefits to safety and soundness, consumers or the U.S. economy. Thus, in addition to focusing on streamlining existing regulations consistent with the goals of EGRPRA, the Agencies should confront the ever-increasing regulatory and supervisory burdens that are distracting both supervisors and banks from prioritizing the management of banks’ most significant financial risks.

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[1] The Bank Policy Institute is a nonpartisan public policy, research and advocacy group that represents universal banks, regional banks, and the major foreign banks doing business in the United States. The Institute produces academic research and analysis on regulatory and monetary policy topics, analyzes and comments on proposed regulations, and represents the financial services industry with respect to cybersecurity, fraud, and other information security issues.

[2] See OCC, FRB, FDIC, Regulatory Publication and Review Under the Economic Growth and Regulatory Paperwork Reduction Act of 1996, 89 FR 8084 (Feb. 06, 2024).

[3] Id. at 8085.

[4] Multiple agencies may also initiate simultaneous enforcement actions, which can significantly burden banks with high costs and little added value to the overall safety and soundness of the banking system or the individual institution, as these actions often address the same underlying issues. Most typically, interagency coordination has related to important process issues regarding how parallel investigations are conducted, as well as the timing of when actions are brought. We continue to encourage enhancement of interagency coordination with the aim of ensuring a fair and just overall result (i.e., not merely in terms of conducting parallel investigations and timing of when actions are brought).

[5] See, e.g., CFPB, Overdraft Lending: Very Large Financial Institutions, 89 FR 13852 (Feb. 23, 2024) (proposal to apply Regulation Z to overdraft credit provided by very large institutions unless credit is provided at or below costs and losses as a true courtesy to consumers); Credit Card Penalty Fees (Regulation Z), 89 FR 19128 (March 15, 2024) (final rule imposes a smaller safe harbor for late fees); SEC, Safeguarding Advisory Client Assets, 88 FR 14672 (May 8, 2023) (proposing many new regulatory requirements for bank custodians, including provisions that would require custodians to segregate client deposits and assume greater liability for investment adviser decisions). See also, Tabitha Edgens, The Lone Ranger in a Town Full of Sheriffs: How the SEC’s Aggressive Agenda Interferes with the Business of Banking, BPI (Sep. 12, 2023), https://bpi.com/the-lone-ranger-in-a-town-full-of-sheriffs-how-the-secs- aggressive-agenda-interferes-with-the-business-of-banking/.