WASHINGTON — Republican senators pressed regulators Tuesday to ensure that banks' participation in federal coronavirus relief programs don’t create new regulatory burdens.
The concerns, which drew a sympathetic response from Federal Reserve Vice Chairman Randal Quarles and acting Comptroller of the Currency Brian Brooks, involve smaller banks that have swollen balance sheets as a result of their participation in the Small Business Administration's Paycheck Protection Program.
“It is important that banks and credit unions are not inadvertently disincentivized from continuing to play a key role in the economic recovery or participate in future efforts,” Senate Banking Committee Chairman Mike Crapo, R-Idaho, said during a hearing. “I urge each of you to continue using your discretion to alleviate the regulatory burdens associated with a variety of asset-based regulatory thresholds on those banks and credit unions temporarily experiencing growth from participation in recovery-oriented programs.”
In addition to representantives from the Fed and the OCC, the hearing featured testimony by Federal Deposit Insurance Corp. Chairman Jelena McWilliams and National Credit Union Administration Chairman Rodney Hood.
Numerous banks that participated in the PPP have crossed the $10 billion asset threshold, which would typically result in supervision by the Consumer Financial Protection Bureau, pricing limits on debit interchange fees and compliance with the Volcker Rule's ban on proprietary trading, among other regulatory requirements.
“[Banks] really stepped up and responded in this crisis by providing credit that swelled their balance sheets and that has triggered, for those especially who have crossed the $10 billion threshold, a number of costly regulatory provisions, one of the most problematic of which is the government-mandated price fixings of the interchange fees,” said Sen. Pat Toomey, R-Pa. “I would just urge you to consider ways in which you might ensure that we don’t punish banks that really did exactly what their communities needed when they needed it.”
Quarles said he believes that regulators have some discretion in providing certain exemptions to banks if they cross new asset thresholds as a result of their participation in the PPP.
“We do have some flexibility in our regulatory framework … to make temporary exceptions. We have done that, and we are continuing to look as to whether we should extend some of that relief,” said Quarles. “I think it’s principally an issue for the smaller banks that are being pushed up over levels than the larger banks that are being pushed into the next category. We aren’t seeing that with the larger banks.”
Brooks noted that FDIC board members recently approved a new position to exclude PPP assets “from audit requirements that are subject to asset size thresholds.”
Brooks added that the regulators are working on a temporary set of rules to ease regulatory burdens on banks that cross new asset thresholds as a result of their participation in the PPP. The rules, he said, are focused on banks with assets under $10 billion.
“Bank regulators on an interagency basis are currently working on a set of rules that would relieve for a period of time certain asset thresholds being tripped that trigger heightened scrutiny and heightened compliance requirements at different levels,” Brooks said. “I think the direction of that discussion is something that will cap out at $10 billion most likely, based on current conversations.”
