Regulators Ask Banks to Identify Burdensome Rules

WASHINGTON — The federal banking agencies on Wednesday began an extensive effort — required by a law passed before the financial crisis — to gather feedback about which rules should be placed under the microscope for potential regulatory relief.

The 1996 law, known as the Economic Growth and Regulatory Paperwork Reduction Act, requires the regulators every 10 years to identify policies that are unnecessary, out of date, or too burdensome for banks to follow. As part of the review — the second of its kind since the law’s enactment — the public will be asked to comment on a wide array of topics.

The agencies, which suggested the process may particularly focus on how rules have affected community banks, specifically asked for comment Wednesday on three topics: applications and reporting; powers and activities; and international operations. They plan three additional requests for comment — on a total of nine further topics — over the next two years. For each round, the public will have 90 days to comment. The regulators also included a chart of the relevant regulations subject to the review.

The "review provides an opportunity for the public and the agencies to look at groups of related regulations and to identify opportunities for burden reduction," the three agencies — the Federal Deposit Insurance Corp., Federal Reserve Board and Office of the Comptroller of the Currency — said in a joint notice.

"For example, the EGRPRA review may facilitate the identification of statutes and regulations that share similar goals or complementary methods where one or more agencies could eliminate overlapping requirements. Alternatively, commenters may identify regulations or statutes that impose requirements that are no longer consistent with the way that business is conducted and that, therefore, the agencies might eliminate."

The other nine topics that will be included in the review are: banking operations; capital; Community Reinvestment Act; consumer protection; directors, officers and employees; money laundering; rules of procedure; Safety and Soundness; and Securities.

The regulators said the process could serve as an "opportunity" to explore steps for easing the regulatory burden community banks and other smaller institutions.

"We are keenly aware of the role that these institutions play in providing consumers and businesses across the nation with essential financial services and access to credit, and we are concerned about the impact of regulatory burden on these smaller institutions," they said.

"We understand that when an agency issues a new regulation or amends a current regulation, smaller institutions may have to devote considerable resources to determine if and how the regulation will affect them. Through the public comment process, the EGRPRA review can help the agencies identify and target regulatory changes to reduce burden on these smaller institutions."

On the first three topics covered in Wednesday’s notice, the agencies identified nine issues for commenters to consider. For example, they asked for comment on how certain congressional statutes should be amended to ease undue burden; whether changes in the financial industry or consumer behavior cause certain rules "to be outdated, unnecessary or unduly burdensome"; and whether any rules or underlying laws unfairly disadvantage certain institutions.

Other issues include the potential for burdensome reporting, recordkeeping and disclosure requirements, and whether any rules impose particular undue burden on smaller institutions.

"Are there regulations or underlying statutes in these categories that impose outdated, unnecessary, or unduly burdensome requirements on a substantial number of community banks or other smaller, insured depository institutions or holding companies?" the agencies said in the notice. "Should any of these regulations be amended or repealed in order to minimize this impact?"