Regulators Largely Pausing New Rules Until Next Administration
Three top financial regulators, the Office of the Comptroller of the Currency (OCC), the Federal Deposit Insurance Corp. (FDIC), and the Federal Reserve (Fed) recently told the House Financial Services Committee (HFSC) that new rule making wouldn’t start until next year, after the incoming Trump administration.
The interactions and testimonies during the Financial Services Committee hearing on “Oversight of Prudential Regulators” revealed some concerns regarding risks in the banking sector. “The banking system remains sound and resilient… Bank lending has continued to grow, albeit at a modest pace that reflects decreased demand and tighter lending standards than we have seen since early last year,” said Michael Barr, Fed Vice Chair for Supervision, according to PYMNTS.
Barr noted that the FDIC is monitoring the rise in delinquency rates among commercial real estate loans, as well as cybersecurity risk. The Fed, FDIC, and OCC have collaborated on the modification of risk based capital requirements in the Basel III Endgame proposal, and expect to continue collaboration in the next year.
FDIC Chairman Martin Gruenberg’s testimony noted a drastic increase in misrepresentations and false advertising about FDIC insurance coverage from nonbank institutions, stating that “[m]isuse of the FDIC-associated terms weakens consumer confidence in the FDIC and the banking system in general.”
Michael Hsu, Acting Comptroller of the Currency, highlighted that the OCC has seen an increase in the sophistication of malign actors, which has impacted both cyber risk and anti-money laundering (AML) risk. “Banks must remain vigilant and continuously improve their cyber, operational, and AML risk management controls and capabilities,” he said.
Hsu also commented on the July 2024 Request for Information on bank-fintech relationships, stating that as long as fintechs are regulated at the state level and remain licensed, there will likely still remain a regulatory gap that nonbanks take advantage of.
