A notice of proposed rulemaking to modify the Federal Deposit Insurance Corporation’s (FDIC) Change in Bank Control Act (CBCA) was withdrawn after receiving mixed reviews among the agency’s board of directors.
The draft proposal, put forward Thursday by Rohit Chopra, director of the Consumer Financial Protection Bureau, would have restored the FDIC’s role in reviewing certain changes in control by removing a notification exemption in the current rule when the Federal Reserve Board reviews a notice under the CBCA. It would have been open to comment and sought feedback on other issue areas related to the rule.
But the proposal did not advance, after receiving criticism from FDIC Board Vice Chairman Travis Hill and Michael Hsu, the acting head of the Treasury Department’s Office of the Comptroller of the Currency. FDIC Chairman Martin Gruenberg supported the rule change.
In his statement, Chopra expressed his concern that “the FDIC’s rules rely solely on the Federal Reserve for certain transactions and therefore violate our statutory responsibility to ensure that banks we supervise are operated in a safe and sound way.” He cited how Farmington State Bank, which had ties to FTX founder and convicted fraudster Sam Bankman-Fried, evaded FDIC oversight by receiving certain control approvals through the Federal Reserve Bank of San Francisco.
Gruenberg noted he also viewed the FDIC’s deference to the Fed on control matters as problematic.
“While the FDIC values and will continue its close collaboration with the Federal Reserve Board on matters related to changes in control affecting FDIC-supervised institutions and their respective holding companies, it is important that the FDIC, as the primary federal regulator of state non-member banks, carry out its independent authority to review who is exercising direct or indirect control over its supervised institutions,” he said in a statement.
Hill stated he felt the rule change would result in bank investors filing duplicative notices with the FDIC and Fed, while Hsu did not support the proposal over concerns it would negatively affect coordination among banking regulators.
No votes on the proposal were taken before it was withdrawn.
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