In a recent interview (her first since being sworn in as Chair of the Federal Deposit Insurance Corporation), Jelena McWilliams provided insight into the FDIC’s likely regulatory agenda.
Ms. McWilliams stated that the FDIC’s top priorities included: (1) reducing regulatory burden on community banks; (2) increasing the speed with which the FDIC reviews charter and deposit insurance applications; and (3) assisting banks to introduce new financial products that serve underserved communities.
Unlike the previous FDIC Chair, Martin Gruenberg, Ms. McWilliams expressed a willingness to reexamine bank capital requirements. Her comments suggest the FDIC might revisit its opposition to a proposal to revise the enhanced supplementary leverage ratio applicable to U.S. global systemically important bank holding companies (GSIB) issued by the OCC and the Board of Governors of the Federal Reserve System that would: (i) set the enhanced supplementary leverage ratio for a GSIB at 50 percent of a the GSIB’s risk-based capital surcharge; (ii) replace the current 6 percent threshold at which an insured depository institution subsidiary of a GSIB is considered “well capitalized” under the prompt corrective action (PCA) framework with a threshold set at 3 percent plus 50 percent of the GSIB surcharge applicable to the insured depository institution; and (iii) make a corresponding change to each GSIB’s external total loss absorbing capacity (TLAC) leverage buffer and long-term debt requirement (and other, minor amendments, to the TLAC rule).
Ms. McWilliams agreed with Mr. Gruenberg that the Volcker Rule, (which bans proprietary trading and which, since the passage of Economic Growth, Regulatory Relief, and Consumer Protection Act, is only applicable to financial institutions with $10 billion of assets or more) is too complicated. Ms. McWilliams voiced her support for rules to revamp the Community Reinvestment Act (CRA), a project that is also on the OCC’s agenda. Ms. McWilliams said banks need more clarity about what activities qualify for CRA credit and the qualifications for CRA loans, and she also appeared to suggest that CRA assessment areas should be reexamined because banks are closing branches in rural communities to avoid criticism of their CRA activities (or the lack thereof) in those communities, which results in less access to financial services and does not serve the needs of those communities.
Finally, Ms. McWilliams stated that the FDIC is reviewing whether to rescind its guidelines for deposit advance loans and that she is considering allowing applicants seeking deposit insurance to make a preliminary, confidential filing to get feedback before a formal application. These comments followed her first speech as Chair in June, where she suggested that the FDIC would make faster decisions on deposit insurance applications, a statement that was interpreted as a signal that under her leadership the FDIC might be more receptive to applications from applicants seeking to form an industrial loan company and de novo charters generally. (In its recent fintech report, the Treasury Department recommended that the FDIC reconsider its guidance on direct deposit advance services and issue new guidance similar to that issued by the OCC. In May 2018, the OCC issued a bulletin setting forth core lending principles and policies and practices for short-term, small-dollar installment lending by national banks, federal savings banks, and federal branches and agencies of foreign banks and encouraging banks to engage in such lending.)