The U.S. Government Accountability Office (GAO) recently issued a report recommending that the federal banking agencies adopt a more rigorous and transparent process for identifying and eliminating outdated, unnecessary, or unduly burdensome banking regulations. Although the report focuses on improving the agencies’ review process rather than recommending the repeal of any specific regulations, its conclusions align closely with the Trump Administration’s broader effort to reduce regulatory burdens throughout the federal government.
The report, Bank Regulatory Reviews: Action Needed to Better Identify and Address Unnecessary or Unduly Burdensome Requirements, examines how the Federal Reserve Board (Fed), the Federal Deposit Insurance Corporation (FDIC), and the Office of the Comptroller of the Currency (OCC) have implemented their responsibilities under the Economic Growth and Regulatory Paperwork Reduction Act of 1996 (EGRPRA). EGRPRA requires the agencies to review their regulations at least once every ten years, solicit public comment, and identify rules that have become outdated, unnecessary, or excessively burdensome.
Agency Practice
For the most recent EGRPRA review, the agencies have grouped their regulations into 12 categories: applications and reporting; power and activities; international operations; consumer protection; directors, officers, and employees; money laundering; rules of procedure; safety and soundness; securities; banking operations; capital; and the Community Reinvestment Act. They have published four notices in the Federal Register soliciting comments on regulations that are outdated, unnecessary, or unduly burdensome, with each notice covering three categories of regulations. They have also held four outreach meetings inviting interested parties to provide their views on any of the categories of regulations.
Assuming the agencies follow the same process that they have used in the past, each agency’s staff will summarize the comments on their respective regulations and provide recommendations regarding those regulations. Each agency’s management will then make decisions on staff recommendations and submit a draft report covering its regulations to the lead agency (the Fed has typically been the lead agency). The lead agency will prepare a draft consolidated report and submit it to the other agencies for review. Once the agencies reach a consensus, the lead agency will submit the report to the FFIEC for a vote. Once approved, the FFIEC will submit a joint report to Congress and publish it in the Federal Register.
A Timely Report
The GAO report comes as the Trump Administration has made regulatory reform one of its principal domestic policy objectives. Since returning to office, the Administration has issued a series of Executive Orders directing agencies to reduce regulatory costs, eliminate unnecessary regulations, and ensure that agencies carefully assess both the benefits and the costs of existing and proposed rules. The Administration has also emphasized that agencies should focus their resources on regulations that produce measurable public benefits while removing those that no longer serve their intended purpose.
Against that backdrop, GAO’s recommendations provide an independent endorsement of many of the principles underlying the Administration’s regulatory reform agenda. Rather than advocating wholesale deregulation, GAO recommends that the banking agencies adopt a disciplined framework for determining whether existing regulations continue to be justified.
GAO’s Findings
GAO found that while the federal banking agencies have conducted the periodic reviews required by EGRPRA, they have not established documented procedures for determining when a regulation should be considered outdated, unnecessary, or unduly burdensome. Nor have they consistently documented how comments received from banks and other stakeholders influenced their decisions regarding whether regulatory changes were warranted.
GAO also found that the agencies have not consistently incorporated recognized best practices for retrospective regulatory review, including:
- Prioritizing regulations that warrant review;
- Performing cost-benefit analyses of existing regulations;
- Evaluating the cumulative impact of multiple regulatory requirements on regulated institutions; and
- Documenting how stakeholder comments affected agency decision-making.
According to GAO, without these practices, Congress, regulated institutions, and the public have little ability to assess whether the agencies’ periodic reviews are accomplishing Congress’s objective of reducing unnecessary regulatory burdens.
GAO’s Recommendations
GAO recommends that each of the three federal banking agencies:
- Develop written procedures for identifying outdated, unnecessary, or unduly burdensome regulations and determining what actions should be taken; and
- Incorporate leading practices for retrospective regulatory review, including prioritization methodologies, cost-benefit analyses, and assessments of cumulative regulatory burden.
Notably, the agencies neither fully embraced nor rejected GAO’s recommendations, instead describing the steps they have already taken in conducting the current EGRPRA review.
Implications for the Banking Industry
The report could prove significant because it provides an analytical framework that may support future regulatory initiatives by the banking agencies. If the agencies implement GAO’s recommendations, regulated institutions may have greater opportunities to persuade regulators that longstanding requirements should be modified or repealed based on changed market conditions, technological developments, or accumulated compliance costs.
The report also lends support to industry arguments that regulators should evaluate the cumulative effects of multiple regulations rather than considering each rule in isolation. Over the past decade, banks and trade associations have frequently argued that the aggregate compliance burden imposed by overlapping supervisory expectations, guidance, and regulations has materially increased operating costs without always producing corresponding supervisory benefits.
Looking Ahead
Whether the banking agencies ultimately implement GAO’s recommendations remains to be seen. Much may depend on the extent to which the agencies embrace the Administration’s broader regulatory philosophy. The OCC, FDIC, and Fed now have an opportunity to demonstrate that the periodic reviews mandated by EGRPRA can become more than simply a procedural exercise.
If the agencies adopt the structured review process recommended by GAO, regulated institutions could see a more systematic examination of legacy regulations, greater transparency regarding agency decision-making, and increased opportunities to advocate for regulatory modernization.
Our Take
Although GAO’s report is technical in nature, its implications extend well beyond the mechanics of EGRPRA. The report reinforces a central premise of the Trump Administration’s regulatory reform agenda: agencies should periodically justify the continued existence of their regulations rather than assuming that rules adopted years, or even decades, ago remain appropriate indefinitely.
For banks and other financial institutions, the report offers reason for cautious optimism. It does not promise widespread deregulation, nor does it recommend the elimination of any particular rule. Instead, it calls for a more disciplined, evidence-based process that could ultimately lead to a regulatory framework that is more efficient, more transparent, and better aligned with current market realities.
Consumer financial services providers should closely monitor how the federal banking agencies respond. If GAO’s recommendations are implemented, the current EGRPRA review may become an important vehicle for meaningful regulatory modernization and burden reduction—objectives that are likely to remain central to the Administration’s financial regulatory agenda.