Bank Prudential Regulation & Regulatory Capital
US Federal Reserve Board Announces Affirmation of Current Countercyclical Capital Buffer
On December 1, 2017, the US Board of Governors of the Federal Reserve System announced that it voted to maintain the countercyclical capital buffer at its current level of 0%. In coming to this decision, the Federal Reserve Board consulted with the Federal Deposit Insurance Corporation and the Office of the Comptroller of the Currency, and followed the framework established in the Federal Reserve Board's corresponding policy statement. The countercyclical capital buffer is a tool that can increase financial system resiliency by providing financial institutions with a means to absorb higher losses in times of declining or fluctuating credit conditions.
The press release discussing the Federal Reserve Board's determination is available at: https://www.federalreserve.gov/newsevents/pressreleases/bcreg20171201a.htm.
US Senate Committee on Banking, Housing & Urban Affairs Holds Nomination Hearing of Jerome Powell
On November 28, 2017, the US Senate Committee on Banking, Housing & Urban Affairs held the nomination hearing of Jerome Powell to serve as Chair of the Federal Reserve Board. Governor Powell's written testimony briefly discussed his background and the Federal Reserve Board's policy goals of maximum employment and price stability. Governor Powell acknowledged the Federal Reserve Board's efforts to tailor regulation to a bank's size and risk profile but stressed, however, that balance must be maintained between easing of regulatory burdens and preserving core regulatory reforms. Senator Sherrod Brown and Mike Crapo each expressed some degree of support for Governor Powell. Senator Crapo spoke briefly about the regulatory burden on the financial industry, especially with regard to smaller community institutions, and referenced bipartisan legislation that has been introduced to alleviate some of these burdens. Senator Brown, on the other hand, cautioned against deregulation, and expressed concerns about the direction of financial regulation under the current Administration.
Governor Powell's written testimony is available at: https://www.federalreserve.gov/newsevents/testimony/powell20171128a.htm, Senator Brown's opening statement is available at: https://www.banking.senate.gov/public/index.cfm/democratic-press-releases?ID=EF5C332D-1F15-44CA-8CC0-3366749E6DD9 and Senator Crapo's opening statement is available at:
First Deputy Comptroller of the Currency Keith Noreika Discusses "Whether Bank Holding Companies Are Obsolete"
On November 28, 2017, Keith Noreika, First Deputy Comptroller of the Currency discussed whether bank holding companies are obsolete, a topic he described as both timely and complex. Mr. Noreika, newly relieved of his post as Acting Comptroller, contended that the correct question to be asking is whether bank holding companies are a universally sound practice for all banks, noting that they may inherently be more valuable for large, complex, institutions, as compared to smaller, more traditional banks. He suggested that many of the reasons why bank holding companies were established initially are no longer as large of a concern given the evolution of state and federal laws and regulation. Moreover, he contended that while operating a bank holding company results in very high compliance and regulatory costs, in many instances, the powers granted to banks have expanded, while those granted to bank holding companies have narrowed. Mr. Noreika also noted that while bank holding companies may be a tool for reducing systemic risk, they are not the only tool that can accomplish this end and presented alternatives to the bank holding company construct such as merging the holding company into the bank.
The transcript of Mr. Noreika's remarks is available at: https://www.occ.treas.gov/news-issuances/speeches/2017/pub-speech-2017-142.pdf.
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