Washington, D.C. — Today, Bank Policy Institute President & CEO Greg Baer testified before the Senate Committee on Banking, Housing, and Urban Affairs on examination and enforcement actions taken by the banking agencies as part of their supervisory role. In his testimony Mr. Baer argued that regulators have effectively turned examination reports into enforcement actions, often by issuing supervisory mandated in the form of Matters Requiring Attention (MRAs) and Matters Requiring Immediate Attention (MRIAs) that are treated as binding, are not subject to due process or congressional oversight, and often relate to matters immaterial to safe and sound banking practices.
“[W]hen the great majority of requirements are imposed in secret, with no process, they can vary across banks and across time because there are simply no checks or balances” wrote Greg Baer in his submitted written testimony. “So, this fundamentally is not an issue of tighter regulation or looser regulation (deregulation) but an issue of consistent and predictable regulation that is consistent with the law.”
Mr. Baer’s testimony presented four key recommendations:
- The banking agencies should grant petition for rulemaking regarding supervisory practices consistent with the September 2018 interagency statement issue clarifying that guidance is nonbinding and only violations of law will form the basis of an MRA.
- Agencies should seek public comment on whether an MRA is an unenforceable suggestion, or a de facto order issued only when there is a violation of law, and the outcome of such determination should be consistent with the Administrative Procedure Act-prescribed process.
- The agencies should adopt a zero-based review application process that emphasizes transparency and accountability including regular reporting to the Governors of the Federal Reserve, Comptroller of the Currency, and Directors of the FDIC.
- The CAMELS rating system should be replaced with standards that are objective, transparent, and consistent as opposed to subjective, opaque, and ad hoc and assessment of management should focus on financial management.
BPI and the American Bankers Association petitioned the banking agencies to provide clarity to the examination process by proposing a formal rulemaking to codify the September 2018 interagency statement into a binding regulation.
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About the Bank Policy Institute. The Bank Policy Institute (BPI) is a nonpartisan public policy, research and advocacy group, representing the nation’s leading banks and their customers. Our members include universal banks, regional banks and the major foreign banks doing business in the United States. Collectively, they employ almost 2 million Americans, make nearly half of the nation’s small business loans, and are an engine for financial innovation and economic growth.
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