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Senate Banking Committee Spotlights the Nation’s Financial Regulators

The U.S. Senate Banking, Housing, and Urban Affairs Committee recently held a hearing titled, “Oversight of Financial Regulators: Protecting Main Street Not Wall Street,” at the Dirksen Senate Office Building in Washington, D.C.

Witnesses included Michael Barr, Vice Chair for Supervision of the Federal Reserve; Martin Gruenberg, Chair of the Federal Deposit Insurance Corporation (FDIC); Todd Harper, Chair of the National Credit Union Administration (NCUA).

The testimony from the heads of the four federal agencies focused on protecting the nation’s banking and credit union system, and making sure the system serves everyone.

“Earlier this year, we witnessed three of the largest bank failures in U.S. history,” said Sen. Sharrod Brown during the hearing. “These failures reminded us that bankers’ hubris, greed, and negligence continue to pose grave threats to our financial system, and to American workers and small businesses. This time our system bent, but fortunately it did not break.”

Vice Chairman Barr explained the resiliency of the nation’s banking system, as after the failure of three major banks earlier in the year, banking organizations continue to report capital and liquidity ratios above minimum regulatory levels, as earnings performance have remained solid and in line with pre-pandemic levels, despite recent pressure on net interest margins.

“Regulatory capital ratios increased during the first half of 2023. While liquidity levels have come down from their peak in 2021, they remain above pre-pandemic levels and, as applicable, above minimum regulatory levels, leaving the banking system well positioned to mitigate liquidity pressures that may arise,” said Barr in his testimony.

Accountability of banking execs was a hot topic discussed during the hearing, as stressed by Sen. Brown, who serves as Chair of the U.S. Senate Banking, Housing, and Urban Affairs Committee.

“This means improving bank supervision and holding bank executives accountable for risky behavior that drives their banks into the ground,” said Sen. Brown. “And it means strengthening rules, so that banks are serving their communities and have the capital necessary to continue serving their communities during stress events.”

Despite these failures, it was pointed out that just a handful of the largest banks now hold $14.75 trillion in assets—more than half the nation’s Gross Domestic Product (GDP).

Adherence to the Community Reinvestment Act (CRA) was also discussed. The CRA, enacted in 1977 to prevent redlining and to encourage banks and savings associations to help meet the credit needs of low- and moderate-income (LMI) neighborhoods and individuals. Federal banking agencies recently issued an interagency final rule implementing modernization of the CRA.

“The rule will provide clarity and consistency for all banks, but also tailors evaluations and data collection to bank size so that community banks do not have additional burden,” said Hsu in his testimony. “The agencies also responded to commenters by providing a 24-month phase-in period to allow banks and regulators time to prepare for it. The OCC will now turn its efforts to perhaps the most important step toward reducing inequality, which is the implementation of the new rule.”

Click here to view a recap of the Senate Banking Committee hearing, “Oversight of Financial Regulators: Protecting Main Street Not Wall Street.”

About Author: Eric C. Peck

Eric C. Peck has 20-plus years’ experience covering the mortgage industry, he most recently served as Editor-in-Chief for The Mortgage Press and National Mortgage Professional Magazine. Peck graduated from the New York Institute of Technology where he received his B.A. in Communication Arts/Media. After graduating, he began his professional career with Videography Magazine before landing in the mortgage space. Peck has edited three published books and has served as Copy Editor for Entrepreneur.com.

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