When it comes to regulatory reform, smaller community banks should be a prime concern, according to Acting Comptroller of the Currency Keith A. Noreika. Noreika said as much in his address to the Senate Committee on Banking, Housing, and Urban Affairs on Thursday.
“It is time again for a constructive, bipartisan conversation about how to recalibrate our regulatory framework,” Noreika told the Committee. “In doing so, we must carefully consider the cumulative effects of our actions, especially on community and midsize banks.”
According to Noreika, since his arrival at the Office of the Comptroller of the Currency more than a month ago, he’s sought insight from OCC staff, federal and state employees, bankers, academics, community groups, and other affected parties on how to “reduce unnecessary regulatory requirements and encourage economic growth.”
One of the issues he’s heard most about in these efforts? Noreika said its “regulatory redundancy.”
“My support of legislative action to rationalize our regulatory framework relies on our organically developed decentralization of authority and responsibility,” he said. “Independent regulators for different and unique financial sectors ensure multiple points of view and important checks and balances. But, we must be mindful that as our system has evolved, it has created unnecessary regulatory burden and overlap. The need now is to recalibrate roles and responsibilities to maximize efficiency and eliminate growth-inhibiting redundancy.”
Regulatory requirements also tend to be “inflexible” and “one-size-fits-all”—an issue particularly problematic to smaller and mid-size institutions, Noreika said.
“Congress could streamline the regulation of smaller, less complex bank holding companies by amending the law so that when a small depository institution constitutes the majority of its holding company’s assets, the federal regulator of the depository institution would have sole examination and enforcement authority for the holding company as well,” he said.
Noreika also suggested allowing smaller banks access to publicly traded markets and deposit insurance which, he said, “could eliminate a statutory barrier to entry for new community banks.” Noreika also said it’s time to address the Volcker Rule.
“A bipartisan consensus is emerging that the Volcker Rule needs clarification and recalibration to eliminate the burden on banks that do not engage in covered activities and do not present systemic risks,” he told the Committee. “Various options exist that can be pursued at both the Congressional and agency levels. I hope that we, the agencies, can move forward on seeking public comment on this topic soon.”