Coming on the heels of the U.S. House of Representatives passing H.R. 10, the Financial CHOICE Act, in an effort to modify the Consumer Financial Protection Bureau among other objectives, the U.S. Department of the Treasury late on Monday issued its first in a series of reports to President Trump examining the U.S. financial regulatory system and detailing executive actions and regulatory changes that can be immediately undertaken to provide “much-needed” relief.
The report detailed the following findings:
—Community financial institutions — banks and credit unions — are critically important to serve many Americans.
—Capital, liquidity and leverage rules can be simplified to increase the flow of credit.
—Ensure banks are globally competitive.
—Improving market liquidity is critical for the U.S. economy.
—The Consumer Financial Protection Bureau must be reformed.
—Regulations need to be better tailored, more efficient and effective.
—Congress should review the organization and mandates of the independent banking regulators to improve accountability.
“Properly structuring regulation of the U.S. financial system is critical to achieve the administration’s goal of sustained economic growth and to create opportunities for all Americans to benefit from a stronger economy,” Treasury Secretary Steven Mnuchin said.
“We are focused on encouraging a market environment where consumers have more choices, access to capital and safe loan products — while ensuring taxpayer-funded bailouts are truly a thing of the past,” Mnuchin continued.
During the past four months, the department indicated Mnuchin and other Treasury officials met with hundreds of stakeholders across the financial ecosystem, including community, independent, regional and large banks, regulators, Financial Stability Oversight Council (FSOC) members, consumer advocates, academics, analysts and investors. These listening sessions provided what officials called a “very clear picture” of redundancy, fragmentation and inefficiency in regulatory framework.
“We congratulate the House on passing the Financial CHOICE Act. The report we are releasing today focuses on solutions the executive branch can execute through regulatory changes and executive actions. We look forward to working on a parallel track with Congress to provide swift relief, particularly to community banks,” Mnuchin said.
Officials summarized the 149-page report that can be downloaded here by pinpointing five recommendations to structure new regulatory framework, including
• Improving regulatory efficiency and effectiveness by critically evaluating mandates and regulatory fragmentation, overlap, and duplication across regulatory agencies.
• Aligning the financial system to help support the U.S. economy.
• Reducing regulatory burden by decreasing unnecessary complexity.
• Tailoring the regulatory approach based on size and complexity of regulated firms requiring greater regulatory cooperation and coordination among financial regulators.
• Aligning regulations to support market liquidity, investment and lending in the U.S. economy.
As a next step, officials from the Treasury and the Trump administration said they will begin working with Congress, independent regulators, the financial industry and trade groups to implement the recommendations advocated in the report through changes to statutes, regulations and supervisory guidance.
The department went on to mention this Treasury report is the first in a series of reports examining the U.S. financial regulatory system. Subsequent reports will be issued over the coming months and will focus on markets, liquidity, central clearing, financial products, asset management, insurance and innovation, among other key areas.
Banking groups cheer report
Leaders of both the American Bankers Association (ABA) and Consumer Bankers Association (CBA) applauded the Treasury Department for this report, each using the phrasing that the action was an “important step.”
ABA president and chief executive officer Rob Nichols said, “Today’s Treasury report is an important step to refine financial regulations to ensure that they are supporting — not inhibiting — economic expansion. We applaud Secretary Mnuchin for recognizing that we need regulatory reform to boost economic growth, and we expect this report will serve as a catalyst in that effort. We’re committed to working with the administration and regulators on these recommendations to allow banks to better serve their customers and communities, without compromising safety and soundness.
Nichols pointed out that many recommendations for regulatory reform highlighted by the Treasury Department also have been previously endorsed by ABA such as changes to the Volcker Rule as well as adjustments to regulations surrounding liquidity and stress testing
“While we applaud these efforts toward regulatory reform, we know there is more to do,” Nichols said. “We urge regulators and Congress to take up these recommendations expeditiously, and to consider additional changes so banks can continue to play their important role in accelerating economic growth.”
CBA president and CEO Richard Hunt took a similar path in assessing the Treasury Department’s analysis, reiterating points about how the CFPB should operate.
“The Treasury Department’s report is an important first step in recognizing how a duplicative and onerous regulatory environment harms banks, the economy, and, more importantly, consumers,” Hunt said. “It is imperative to right-size regulation to better promote the strengths of the banking industry, which contribute to economic growth, access to credit and consumer choice.
“We especially applaud Secretary Mnuchin and the Department for suggesting reforms to the CFPB’s governing structure, as CBA believes a bipartisan commission at the bureau is paramount to creating long-term stability and certainty for the industry. In addition, we are also encouraged by the department’s recommendation to provide a process over federal regulators to streamline regulatory efforts,” Hunt continued.
“We appreciate the department’s report, as it offers pragmatic solutions in line with today’s economic needs,” Hunt went on to say.