STATEMENT OF
ANDREW C. HOVE, JR.
ACTING CHAIRMAN
FEDERAL DEPOSIT INSURANCE CORPORATION
ON
S. 1405
THE FINANCIAL REGULATORY RELIEF
AND ECONOMIC EFFICIENCY ACT
FOR THE
COMMITTEE ON BANKING, HOUSING, AND URBAN AFFAIRS
UNITED STATES SENATE
10:00 A.M.
MARCH 10, 1998
ROOM 538, DIRKSEN SENATE OFFICE BUILDING
Mr. Chairman and members of the Committee, I appreciate the opportunity to present
the views of the Federal Deposit Insurance Corporation on S. 1405, the Financial
Regulatory Relief and Economic Efficiency Act. I commend you, Mr. Chairman, and
members of the Committee for your continuing commitment to relieving regulatory
burden on financial institutions. S. 1405 contains many necessary and beneficial
provisions that the FDIC supports.
RELIEVING REGULATORY BURDEN
As this Committee is well aware, over the past 25 years, Congress has enacted many
laws and the banking agencies have adopted many regulations that have protected
consumers, strengthened financial institution safety and soundness and improved crime
detection. While, individually, few of these laws impose a significant burden on financial
institutions, cumulatively, they have created a complex regulatory framework that raises
costs for banks and savings institutions. The FDIC shares your commitment to relieving
this regulatory burden while maintaining the benefits and protections established for
consumers and financial institutions.
Over the past several years, Congress and the federal regulatory community have
become more sensitive to regulatory costs, especially those incurred by small
businesses. Several recently enacted statutes underscore this concern. For example,
the Contract with America Advancement Act of 1996 strengthened requirements that
federal agencies consider the effect of regulations on small entities. Section 303(a) of
the Riegle Community Development and Regulatory Improvement Act of 1994 (CDRI)
required the FDIC and the other bank and thrift regulatory agencies to review
systematically their regulations and written policies to improve efficiency, reduce
unnecessary costs, and eliminate inconsistencies and outmoded and duplicative
requirements. Section 2222 of the Economic Growth and Regulatory Paperwork
Reduction Act of 1996 requires each appropriate federal banking agency and the
ANDREW C. HOVE, JR.
ACTING CHAIRMAN
FEDERAL DEPOSIT INSURANCE CORPORATION
ON
S. 1405
THE FINANCIAL REGULATORY RELIEF
AND ECONOMIC EFFICIENCY ACT
FOR THE
COMMITTEE ON BANKING, HOUSING, AND URBAN AFFAIRS
UNITED STATES SENATE
10:00 A.M.
MARCH 10, 1998
ROOM 538, DIRKSEN SENATE OFFICE BUILDING
Mr. Chairman and members of the Committee, I appreciate the opportunity to present
the views of the Federal Deposit Insurance Corporation on S. 1405, the Financial
Regulatory Relief and Economic Efficiency Act. I commend you, Mr. Chairman, and
members of the Committee for your continuing commitment to relieving regulatory
burden on financial institutions. S. 1405 contains many necessary and beneficial
provisions that the FDIC supports.
RELIEVING REGULATORY BURDEN
As this Committee is well aware, over the past 25 years, Congress has enacted many
laws and the banking agencies have adopted many regulations that have protected
consumers, strengthened financial institution safety and soundness and improved crime
detection. While, individually, few of these laws impose a significant burden on financial
institutions, cumulatively, they have created a complex regulatory framework that raises
costs for banks and savings institutions. The FDIC shares your commitment to relieving
this regulatory burden while maintaining the benefits and protections established for
consumers and financial institutions.
Over the past several years, Congress and the federal regulatory community have
become more sensitive to regulatory costs, especially those incurred by small
businesses. Several recently enacted statutes underscore this concern. For example,
the Contract with America Advancement Act of 1996 strengthened requirements that
federal agencies consider the effect of regulations on small entities. Section 303(a) of
the Riegle Community Development and Regulatory Improvement Act of 1994 (CDRI)
required the FDIC and the other bank and thrift regulatory agencies to review
systematically their regulations and written policies to improve efficiency, reduce
unnecessary costs, and eliminate inconsistencies and outmoded and duplicative
requirements. Section 2222 of the Economic Growth and Regulatory Paperwork
Reduction Act of 1996 requires each appropriate federal banking agency and the
Federal Financial Institutions Examination Council (FFIEC) to review all regulations
every 10 years to identify outdated and unnecessary requirements imposed on insured
depository institutions.
The FDIC has taken its responsibilities under CDRI seriously. FDIC Director Joseph H.
Neely directed a senior level task force that reviewed each FDIC regulation and written
policy to determine whether it was necessary to ensure a safe and sound banking
system or to protect consumers. While CDRI was not specifically designed to aid small
banks or thrifts, the FDIC paid particular attention to their needs. In 1996, the FDIC
examined all 120 of its regulations and written statements of policy, 60 of these in
conjunction with other banking agencies. FDIC staff recommended rescinding or
revising 90 of the 120 regulations and policy statements to improve efficiency, reduce
unnecessary costs, and remove inconsistencies and outmoded and duplicative
requirements. The staff determined that these deletions and revisions could be made
without harming financial institution safety and soundness or consumer protection.
As of March 1, 1998, the FDIC's Board of Directors had acted on all but nine of the 90
recommendations for change. All but one of the remaining nine recommendations are
being coordinated on an interagency basis, and the agencies recently reached
agreement on implementing three of the recommendations. With regard to the rest, all
the agencies are committed to reaching agreement as soon as possible.
One of the FDIC's most important regulatory relief proposals would simplify our
application procedures. This proposal would consolidate the FDIC's application
procedures previously found in various parts of our regulations into a single rule. The
proposal also would revise three related statements of policy and delete two others. The
revised procedures would expedite processing of over 90 percent of applications filed
with the FDIC. For applications filed by well-managed, well-capitalized institutions, the
procedures would fix or shorten the time frame for receiving comments and for the FDIC
to act on the application, and would treat some applications, such as branch
applications, as approved if not acted on by a certain date.
The FDIC also has proposed combining regulations governing activities and
investments of insured state banks and savings associations into a single regulation.
This proposal also would update the FDIC's regulations governing the safety and
soundness of securities activities of subsidiaries and affiliates of state nonmember
banks. The proposal would allow institutions to engage in certain activities and make
certain investments by filing a notice rather than an application with the FDIC. This
proposal should relieve regulatory burden significantly without affecting safety and
soundness, because the FDIC retains the ability to place restrictions on an activity or
deny a particular institution the right to engage in the activity.
Additional regulatory relief actions taken by the FDIC include:
* Streamlining the FDIC's securities registration and disclosure regulation by cross-
referencing the Securities and Exchange Commission regulations; * Increasing the
every 10 years to identify outdated and unnecessary requirements imposed on insured
depository institutions.
The FDIC has taken its responsibilities under CDRI seriously. FDIC Director Joseph H.
Neely directed a senior level task force that reviewed each FDIC regulation and written
policy to determine whether it was necessary to ensure a safe and sound banking
system or to protect consumers. While CDRI was not specifically designed to aid small
banks or thrifts, the FDIC paid particular attention to their needs. In 1996, the FDIC
examined all 120 of its regulations and written statements of policy, 60 of these in
conjunction with other banking agencies. FDIC staff recommended rescinding or
revising 90 of the 120 regulations and policy statements to improve efficiency, reduce
unnecessary costs, and remove inconsistencies and outmoded and duplicative
requirements. The staff determined that these deletions and revisions could be made
without harming financial institution safety and soundness or consumer protection.
As of March 1, 1998, the FDIC's Board of Directors had acted on all but nine of the 90
recommendations for change. All but one of the remaining nine recommendations are
being coordinated on an interagency basis, and the agencies recently reached
agreement on implementing three of the recommendations. With regard to the rest, all
the agencies are committed to reaching agreement as soon as possible.
One of the FDIC's most important regulatory relief proposals would simplify our
application procedures. This proposal would consolidate the FDIC's application
procedures previously found in various parts of our regulations into a single rule. The
proposal also would revise three related statements of policy and delete two others. The
revised procedures would expedite processing of over 90 percent of applications filed
with the FDIC. For applications filed by well-managed, well-capitalized institutions, the
procedures would fix or shorten the time frame for receiving comments and for the FDIC
to act on the application, and would treat some applications, such as branch
applications, as approved if not acted on by a certain date.
The FDIC also has proposed combining regulations governing activities and
investments of insured state banks and savings associations into a single regulation.
This proposal also would update the FDIC's regulations governing the safety and
soundness of securities activities of subsidiaries and affiliates of state nonmember
banks. The proposal would allow institutions to engage in certain activities and make
certain investments by filing a notice rather than an application with the FDIC. This
proposal should relieve regulatory burden significantly without affecting safety and
soundness, because the FDIC retains the ability to place restrictions on an activity or
deny a particular institution the right to engage in the activity.
Additional regulatory relief actions taken by the FDIC include:
* Streamlining the FDIC's securities registration and disclosure regulation by cross-
referencing the Securities and Exchange Commission regulations; * Increasing the