Federal Reserve Board ("FRB") Vice Chair for Supervision Randal Quarles highlighted the agency's continuing efforts to tailor its post-crisis regulatory framework.
In testimony before the Senate Committee on Banking, Housing, and Urban Affairs, Mr. Quarles stated that current banking conditions have improved since the crisis. Citing an updated Supervision and Regulation Report, Mr. Quarles noted that the financial performance of the banking industry has been strong due to, in part, bank profitability and the fact that net interest margins have remained high. He said that capital levels "remain well above regulatory requirements" and nonperforming loan ratios are below their five-year averages.
Mr. Quarles stated the agency must continue to re-evaluate post-crisis reforms as required by the Economic Growth, Regulatory Relief and Consumer Protection Act. He listed the agency's current reform efforts, which include:
- creating an interagency Community Bank Leverage Ratio to facilitate the process for community banking organizations to meet their capital requirements;
- expanding the range of community banking organizations that are eligible for (i) longer examination cycles and (ii) holding company capital requirement exemptions;
- proposing more limited regulatory reporting requirements for community banks;
- adjusting the regulatory capital treatment of high-volatility commercial real estate exposures and the regulatory liquidity treatment of municipal securities;
- exempting community banking organizations from the Volcker Rule;
- clarifying how smaller institutions can work together to address their Bank Secrecy Act and AML risks;
- consolidating the role of stress testing in the FRB's supervisory work by, among other things, moving less complex CCAR firms to an extended testing cycle; and
- seeking feedback on modernizing the Community Reinvestment Act.
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