About | HeinOnline Law Journal Library | HeinOnline Law Journal Library | HeinOnline
LOG IN
LOG IN

1 1 (January 17, 2018)

handle is hein.crs/govcgzs0001 and id is 1 raw text is: Financial Reform: Bank Supervision January 17, 2018 Reforms to the bank supervision framework have been proposed as part of the broader financial reform debate, including in H.R. 10, which passed the House on June 8, 2017, and S. 2155, which was reported by committee on December 18, 2017. Bank regulation has three distinct components: rulemaking (the authority to implement rules with which banks must comply); enforcement (the authority to take certain legal actions, such as imposing fines, against an institution that fails to comply with rules and laws); and supervision. Supervision refers to the authority of certain regulators- the Federal Reserve (the Fed), the Office of the Comptroller of the Currency (OCC), the Federal Deposit Insurance Corporation (FDIC), the National Credit Union Administration (NCUA), and the Consumer Financial Protection Bureau (CFPB)-to monitor and examine banks, impose reporting requirements, and instruct banks to modify behavior. Supervision enables regulators to ensure banks are in compliance with applicable laws and regulation and to evaluate and promote the safety and soundness of individual banks (known as micro-prudential supervision) and the banking or financial system as a whole (macro-prudential supervision). In addition, regulators evaluate bank compliance with consumer protection and fair lending laws (consumer compliance supervision). Subjecting banks to a supervisory program may also promote public and market confidence in the banking system. Regulators have complementary tools to achieve their supervisory goals, as shown in Figure 1. They continuously monitor banks, often using data banks are required to report and information gathered during previous examinations. Examiners can use information gathered through monitoring to determine the scope and areas of focus for upcoming exams. Periodic examinations (often on-site at bank offices) involve an evaluation of bank practices and performance. Examiners may either objectively confirm whether banks meet quantitative requirements set by regulation, or they may have discretion to qualitatively interpret whether a bank satisfies the goals of a regulation. In addition, regulators are permanently placed on-site at offices of certain large banks. Bank examiners rate a bank based on the Uniform Financial Institutions Ratings System, wherein the banks receive a rating from 1 (best) to 5 (worst) across six CAMELS components-capital adequacy, asset quality, management, earnings, liquidity, and sensitivity to market risk-and a composite rating based on all those components. Examiners communicate findings and ratings to bank management, and (if necessary) prescribe required corrective actions. Figure I. The Bank Examination Cycle i:::iiiiiiiiiiiiii:i: : ::............ ... Source: Consumer Financial Protection Bureau. The 1 15th Congress is considering legislation to provide regulatory relief' for banks. Regulatory relief proposals, may involve a trade-off between reducing costs associated with regulatory burden and reducing benefits of regulation. Proponents of regulatory relief argue that certain regulations (including ones introduced in response to the 2007-2009 financial crisis) are unduly burdensome, meaning their costs do not justify the benefits. In the case of supervision, they contend the time and resources banks dedicate to complying with various examinations and reporting requirements hinder banks' ability to provide credit, restraining economic growth. Opponents of relief generally believe the current regulatory structure strengthens financial stability and consumer protections, which encourages economic growth. They generally view supervisory actions as striking the appropriate balances ensuring banks are well managed and consumers are protected on one hand, while minimizing regulatory burden on the other hand. L '.g~s a i ', ,, ................... ........ CFPB Supervision. H.R. 10 would eliminate the CFPB's consumer compliance supervisory authority over large banks, shifting that authority back to the Fed, 0CC, FDJC, and NCUA. H.R. 3072 would raise the asset threshold at which the CFPB becomes a bank's supervisor from $10 billion to $50 billion. Before 2010, the federal bank regulators were charged with regulating for both safety and soundness and consumer compliance. Pursuant to the Dodd-Frank Act, the CFPB acquired certain consumer compliance powers over banks and credit unions that vary based on their asset size. For institutions with more than $10 billion in assets, the CFPB is generally the primary supervisor for consumer compliance. For institutions with $10 billion or less in assets, the prudential regulator generally remains the primary supervisory authority for consumer protection. .O 'T mppm qq\ a , q mmm, go 'S I 11LIANJILiN,

What Is HeinOnline?

HeinOnline is a subscription-based resource containing thousands of academic and legal journals from inception; complete coverage of government documents such as U.S. Statutes at Large, U.S. Code, Federal Register, Code of Federal Regulations, U.S. Reports, and much more. Documents are image-based, fully searchable PDFs with the authority of print combined with the accessibility of a user-friendly and powerful database. For more information, request a quote or trial for your organization below.



Short-term subscription options include 24 hours, 48 hours, or 1 week to HeinOnline.

Purchase Access

Already a HeinOnline Subscriber?

Log In

profiles profiles most