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OCC’s Curry Details Regulatory Relief for Small Banks

Joe Mont | December 2, 2014

The message from Comptroller of the Currency Thomas Curry to small- and medium-sized banks overwhelmed by regulation: he feels your pain. In a speech this week, Curry floated regulatory reforms that could make compliance easier for them, including a new examination cycle for healthy banks and exempting smaller financial institutions from the Volcker Rule.

Curry’s remarks came during the first of a series of public meetings being held throughout the country as part of the reviews required by the Economic Growth and Regulatory Paperwork Reduction Act.

EGRPRA requires that regulations prescribed by the Federal Financial Institutions Examination Council, Office of the Comptroller of the Currency, Federal Deposit Insurance Corporation, and Board of Governors of the Federal Reserve System be reviewed by the agencies at least once every 10 years to identify “outdated, unnecessary, or unduly burdensome regulations and consider how to reduce regulatory burden on insured depository institutions.” The Consumer Financial Protection Bureau is required to review its significant regulations and publish a report of its review five years after the regulations take effect. The second EGRPRA review is currently underway.

Community banks and thrifts don’t have the same kind of resources that large institutions can bring to bear on regulatory compliance, and “each unnecessary rule we eliminate or streamline makes it that much easier for them to serve the economic needs of their communities,” Curry said. “What worries me is the way that the regulatory rulebook builds up over time, adding layer after layer of requirements that can be quite onerous for small banks.”

The OCC is geared up to make changes, when it can legally and properly do so, that a regulation is “unduly burdensome,” Curry said, describing three specific proposals that have been discussed with members of Congress. “We are hopeful that Congress will act on them in the next legislative session,” he said.

Among those plans is that “a greater number of healthy, well-managed community institutions ought to qualify for the 18-month examination cycle.” By raising the asset threshold from $500 million to $750 million, 300 additional banks and thrifts would qualify for the longer examination schedule, reducing their burden and allowing regulators to focus their supervisory resources banks and thrifts that may “present capital, managerial, or other issues of supervisory concern.”

Also “ripe for congressional action” is a community bank exemption from the Volcker Rule, an idea first floated by Federal Reserve Board Governor Daniel Tarullo during Congressional testimony earlier this year. Banks and thrifts with less than $10 billion in assets would be exempt from the rule if that plan finds favor with Congress, Curry explained.

Congress may also consider a proposal that would give federal savings associations greater flexibility to expand their business model without changing their governance structure. “It’s important that they, like other businesses, have the flexibility to adapt to changing economic and business environments in order to meet the needs of their communities, and they shouldn’t have to bear the expense of changing charters in order to do so,” Curry said.