McWilliams: Regulation Stifles Innovation

May 01, 2019
The banking agencies are rethinking their regulatory approach to make it more agile and allow community banks to innovate, FDIC Chairman Jelena McWilliams said at ICBA’s 2019 Capital Summit.

In fact, one of her biggest surprises in her first year heading the agency has been its willingness to evolve, she told community bankers ahead of their congressional meetings.

McWilliams said regulations often stifle innovations that can bring more unbanked consumers into the banking fold. Among its efforts, the agency’s recently launched FDIC Tech Lab is working to reduce regulatory burdens on third-party due diligence to streamline tech partnerships, she said.

In the Q&A session with ICBA President and CEO Rebeca Romero Rainey, McWilliams cited regulatory efforts to modernize the Community Reinvestment Act, increase transparency in Bank Secrecy Act reporting, and mitigate the negative impact of the Current Expected Credit Loss accounting standards. McWilliams also said the FDIC is reviewing feedback on the 9 percent Community Bank Leverage Ratio, which ICBA and community bankers want lowered to 8 percent.

On the question of industrial loan companies, McWilliams said they are “the law of the land” and that the FDIC must accept and consider deposit-insurance applications accordingly.

All current regulations and policies, including those regarding capital and profitability requirements for de novo banks, apply equally to ILCs, she noted. McWilliams said the right place to take up the issue is with Congress, which ICBA is lobbying to permanently close the ILC loophole.

While Capital Summit meetings with lawmakers have concluded, community bankers can continue weighing in on key issues with ICBA’s Virtual Policy Summit. The grassroots resource allows community bankers to send custom messages to their members of Congress on regulatory relief, BSA, a cannabis-banking safe harbor and other policy priorities.

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