In his last policy address as FDIC vice chairman, Thomas Hoenig encouraged policymakers to ease the regulatory burden on community banks while maintaining strong prudential standards.
Speaking in Washington, Hoenig listed rules that could be eliminated or simplified for community banks, such as Basel capital rules, Home Mortgage Disclosure Act reporting, and examination cycles.
Hoenig, whose six-year term at the FDIC is expiring, said community and regional banks are better positioned for regulatory relief than the largest banking firms. He encouraged policymakers to maintain strong prudential standards—such as maintaining strong capital levels and a modified version of the Volcker Rule—which could allow less burdensome administrative rules.
While supporting a mandatory 10 percent capital level across the banking industry, he cited megabank resolution plans, or living wills, as a candidate for regulatory relief at the largest institutions.
“The failure to better understand the nature and disparate effect of regulations on the industry will be to increase the costs of banking and encourage ever-greater consolidation of the industry,” Hoenig said. “Prudential standards strengthen performance, while administrative procedural rules raise new barriers, increase costs, and discriminate against banks that are less able to absorb those costs.”
Read Hoenig’s Speech