WASHINGTON– The FDIC and the OCC have announced proposals aimed at reducing regulations and exam oversight for banks, similar to the announcement by NCUA last week that it will no longer conduct regulation by enforcement.
The Federal Deposit Insurance Corporation (FDIC) said it has approved a pair of proposals that would direct its examiners to focus on core financial issues and restrict their ability to police nonfinancial matters.
The first proposal would define “safety and soundness” for banks as any issues that pose a material financial risk to the institution. Specifically, the proposal would limit the use of so-called “matters requiring attention,” where a regulator orders a bank to address problems, and other enforcement actions to issues that have caused or could cause significant financial harm to the bank or make it more likely to fail, according to the FDIC.
‘Refined Focus’
In a statement, acting FDIC Chairman Travis Hill said examiners would still be able to proactively identify potential problems, but their focus needed to be refined to core financial matters instead of “a litany of process-related items.”
The second proposed rule would codify a practice already adopted by the Trump administration, which has scrapped the use of so-called “reputation risk.” The FDIC and other regulators had earlier announced they would no longer apply that standard.
OCC Announces Guidance in 3 Bulletins
Separately, the Office of the Comptroller of the Currency announced new guidance and proposed rulemakings that it said are designed to reduce “regulatory burden” for community banks and promote economic growth.
In one bulletin, the OCC said it is replacing fixed examination requirements for community banks with a “tailored examination scope and frequency that is consistent with risk-based supervision.”
In a second bulletin, the OCC said that when examining for retail nondeposit investment products, it will use only the core assessment standards in the Community Bank Supervision booklet of the Comptroller’s Handbook.
Third Bulletin
And in a third bulletin, the OCC said its management guidance does not impose prescriptive requirements, such as annual model validations, and that community banks should tailor model risk management practices to their risk exposures, business activities and the complexity and extent of their model use.
