"Chairman Crapo, Ranking Member Brown, and members of the Committee, thank you for the opportunity to testify today on, the Economic Growth, Regulatory Relief, and Consumer Protection Act (the "Act"), which was signed into law on
"When I testified during my confirmation hearing, I told you that one of my top priorities would be the health of the Nation's community banks and their ability to effectively serve their communities. Community banks play a pivotal role in their local economies, and our regulatory regime must do what it can to ensure their continued vitality. Implementation of the Act will play a key role in delivering on this priority.
"My testimony will describe actions that the
Implementation of the Act's Reforms
"Among the issues addressed in the statement is the agencies' position on the company-run stress testing requirements of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the "Dodd-Frank Act"). For depository institutions with average total consolidated assets of
"The interagency statement also addressed a number of other issues, including resolution planning, the Volcker Rule, risk weighting of high volatility commercial real estate (HVCRE) exposures, the examination cycle for small banks, the treatment of municipal obligations under the liquidity coverage ratio (LCR), and an exemption from appraisal requirements for certain transactions.
Section 103: Appraisals for Residential Loans in Rural Areas
"Section 103 of the Act became effective immediately upon enactment and exempts certain loans secured by real property from the agencies' appraisal requirements. The exemption applies to federally related transactions under
Section 201: Small Bank Leverage Ratio
"Section 201 of the Act directs the agencies, in consultation with applicable state bank supervisors, to develop a community bank leverage ratio of not less than 8 percent and not more than 10 percent. Under the law, community banks that exceed the community bank leverage ratio will be considered compliant with all other capital and leverage requirements. This will substantially simplify compliance with capital rules for qualifying banks. This community bank leverage ratio will only be available to certain banks with total consolidated assets of less than
Section 202: Reciprocal Deposits
"Section 202, which became effective upon enactment, provides that, under certain circumstances, reciprocal deposits will not be considered funds obtained, directly or indirectly, by or through a deposit broker under section 29 of the Federal Deposit Insurance Act.
"Reciprocal deposits are defined as deposits that a bank receives through a deposit placement network with the same maturity (if any) and in the same aggregate amount as deposits the bank submitted for placement through the deposit placement network. The
Sections 203 and 204: Volcker Rule
"Section 203 of the Act amends the definition of "banking entity" under section 13 of the Bank Holding Company Act to alter which institutions are subject to the requirements of the Volcker Rule. The term "banking entity" is defined under the Bank Holding Company Act to include an insured depository institution or a company that controls an insured depository institution. Following the passage of the Act, the term "insured depository institution" does not include an institution (A) that functions solely in a trust or fiduciary capacity (subject to certain conditions) or (B) that does not have and is not controlled by a company that has (i) more than
"Section 204 revises the statutory provisions related to the naming of covered funds, effective on the date of enactment. This revision removes certain naming restrictions on covered funds in a manner than enables hedge funds or private equity funds to share the same name as a banking entity that is an investment adviser to the fund under certain conditions.
Section 205: Short Form Call Reports
"Section 205 of the Act requires the banking agencies to issue regulations that allow for a reduced reporting requirement in the first and third quarter Call Reports for "covered depository institutions" that have less than
"The agencies' efforts to implement section 205 will build on the work already done by the
Section 210: Examination Cycle
"Section 210 of the Act raises the total asset threshold from
Section 214: Revised Definition for HVCRE
"Prior to the enactment of the Act, the regulatory capital treatment of HVCRE exposures was a concern for many institutions. Under the standardized approach, banks were required to assign a 150 percent risk-weight to any loans that met the definition of HVCRE. Section 214 provides that the agencies may only require a bank to assign a heightened risk weight to such an exposure if it is an "HVCRE ADC Loan," as defined in the statute. While banks are currently able to report their HVCRE exposures using this new definition, the
Section 403: Municipal Obligations as High-Quality Liquid Assets (HQLA)
"Section 403 of the Act requires the agencies to treat certain municipal obligations as HQLA for purposes of their final rules establishing the LCR and in other regulations incorporating the term HQLA. The section also requires the agencies to amend their liquidity regulations to implement these changes no later than 90 days after enactment. On
Additional FDIC Initiatives
"In addition to implementation of the Act, the
Economic Growth and Regulatory Paperwork Reduction Act (EGRPRA)
"EGRPRA requires the agencies to conduct a joint review of regulations every 10 years and consider whether any of those regulations are outdated or unnecessary. The most recent EGRPRA cycle resulted in a Joint Report to
"Since becoming Chairman, I have focused on reviewing the
"Improving transparency at the
"As the current chair of the
"Thank you again for the opportunity to appear before you today, and I look forward to your questions."
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1 This number does not include shelf charters (new banks formed to acquire a failed bank or another bank), conversions (which includes credit unions converting into banks, or new banks that are spin-offs of existing banks), or a new subsidiary by a banking organization that already has an affiliated bank.