Federal Reserve chair Janet Yellen on Wednesday spoke before the U.S. House Financial Services Committee and gave small and mid-sized banks reason to be hopeful for less-stringent and onerous regulation.
These institutions “should be subject to standards that are materially less stringent.” Yellen said. However, it’s unclear if these changes would lessen the burden auto lenders feel from the Consumer Financial Protection Bureau’s larger participant rule.
The Federal Reserve and “other banking agencies” are in the midst of a review that is required to take place every 10 years under the Economic Growth and Regulatory Paperwork Reduction Act (EGRPRA), she told the committee.
“The agencies are required to “identify provisions that are outdated, unnecessary, or unduly burdensome,” she added. “The Federal Reserve views this review as a timely opportunity to step back and identify ways to reduce regulatory burden, particularly for smaller or less complex banks that pose less risk to the U.S. financial system.”
She said agencies held public comment forums regarding the burden of regulation on companies and held round tables with interested parties.
“One of the Federal Reserve’s fundamental goals is to make sure that our regulatory and supervisory program is tailored to the risk that different financial institutions pose to the system as a whole,” Yellen told the committee. “The largest, most complicated firms must therefore be subject to prudential standards that are more stringent than the standards that apply to other firms. Small and medium-sized banking organizations — whose failure would generally pose much less risk to the system — should be subject to standards that are materially less stringent.”
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