Bill Aims to Ease Regulatory Burden on Smaller Banks

Credit unions and smaller financial institutions have been requesting exemption from Dodd-Frank oversight since the controversial Wall Street reform legislation was passed six years ago. U.S. Sen. Mike Rounds (R-South Dakota) is hoping a new bill he introduced will give those institutions regulatory relief they are seeking.

The Taking Account of Institutions with Low Operation Risk (TAILOR) Act, (S. 3153) introduced by Rounds this week, would require federal regulator agencies to consider the risk profiles and business models of institutions when crafting regulations. Credit unions and smaller banks have long complained about what they see as Dodd-Frank’s “one size fits all” approach that has brought on additional compliance costs that larger institutions can absorb but smaller ones cannot.

“Since the passage of the Dodd-Frank Act in 2010, smaller financial institutions in particular have been negatively impacted by burdensome, unnecessary regulations because of disproportionate compliance costs,” said Rounds. “These disproportionate costs and regulatory hurdles have hurt consumers the most. The TAILOR Act would ease the regulatory burden on smaller financial institutions so they can focus their resources on taking care of their customers, rather than spending time and money on regulatory compliance. This will allow them to better meet the needs of families and local businesses, which will in turn lead to a stronger economy and healthier communities across the state.”

Regulatory agencies such as the Federal Reserve, FDIC , the National Credit Union Administration, the Office of the Comptroller of the Currency, and the Consumer Financial Protection Bureau would be required under the TAILOR Act to consider the risk profile and business models of certain financial institutions and “tailor” the regulations to fit that institution.

“Since the passage of the Dodd-Frank Act in 2010, smaller financial institutions in particular have been negatively impacted by burdensome, unnecessary regulations because of disproportionate compliance costs.”

Sen. Mike Rounds

The TAILOR Act would also require these regulatory agencies to provide annual reports to Congress on steps they are taking to tailor their regulations. Also, the legislation would require regulatory agencies to retroactively tailor any regulations (since the passage of Dodd-Frank in 2010) that do not conform to the TAILOR Act (after review).

NAFCU VP of Legislative Affairs Brad Thaler wrote in a letter to the House Subcommittee on Regulatory Reform last week: “Credit unions are unique and their track record as good actors within the financial services industry proves they should not be grouped together with the unscrupulous entities that the CFPB seeks to restrict. Over-regulation has already had a substantially negative impact on credit unions and their members. Any additional unwarranted regulatory constraint is likely to further encumber products and services and ultimately hurt the consumers they mean to protect.”