Top federal financial regulators testified last week before the House Financial Services Committee (chaired by Rep. Maxine Waters, D-CA) and Senate Banking Committee (Chaired by Sen. Mike Crapo, R-ID), providing their regular updates. FDIC Chairman Jelena McWilliams, Comptroller of the Currency Joseph Otting, Fed Vice Chairman for Supervision Randal Quarles and National Credit Union Administration Chairman Rodney Hood were on the hill.
The hearing touched on various current banking issues, including the Community Banking Leverage Ratio, examiners’ use of guidance, Community Reinvestment Act (CRA) and Bank Secrecy Act (BSA) modernization, megabank leveraged loans, the BB&T-SunTrust merger, among others.
- Senate Banking Committee Chairman Crapo urged the regulators to revisit the Community Bank Leverage Ratio, which implements exemptions from risk-based capital requirements. He has supported setting the CBLR at 8%. That would include roughly 600 highly capitalized community banks otherwise ineligible for relief. He has also supported ensuring the proposed Prompt Corrective Action framework does not deter community banks from using the CBLR. The agencies are proposing a 9% leverage ratio that banks with less than $10 billion in assets must meet in order to be exempt from risk-based capital rules, including Basel III. (ICBA has repeatedly called on the agencies to lower the CBLR to 8%). FDIC Chairwoman Jelena McWilliams said her agency is reviewing comments on the proposal, while Comptroller of the Currency Joseph Otting said the 9% ratio would include roughly 84% of insured banks under $10 billion in assets.
- Federal Reserve Vice-Chairman for Supervision Randall Quarles told the Senate hearing audience “competition in the banking industry is as good as competition anywhere,” and suggested a “sanguine” attitude towards the pending $66B merger between BB&T and SunTrust. The comments came in response to a question from the Ranking Democrat, Sherrod Brown (D-OH).