The Federal Deposit Insurance Corp. Tuesday issued a proposed rule to index key oversight thresholds for inflation, alongside a sweeping set of regulatory proposals aimed at rolling back regulatory measures put in place under former President Biden.
The changes continue the deregulatory trajectory at the agency under Acting Chair Travis Hill, who took over the agency upon former FDIC chair Martin Gruenberg's resignation in January.
Agency officials say the inflation-indexing proposal would shield smaller banks from undue regulatory burdens.
"The changes set forth in this proposal would provide a more durable regulatory framework by helping to preserve, in real terms, the level of certain regulatory thresholds set forth in the FDIC's regulations," an agency memo
The decision to tie bank regulatory thresholds to inflation delivers the banking industry a regulatory change they've been seeking for some time. In July, over 50 bank trade groups
The proposal, which will be open for public comment for 60 days upon publication in the Federal Register, would update thresholds every two years based on changes in the Consumer Price Index. If inflation jumps more than 8% in a single year, the agency would adjust the limits sooner. The thresholds would only move up — they wouldn't be lowered during periods of falling prices — and would be rounded to keep the numbers simple.
The proposal would apply to state-chartered banks overseen by the FDIC and certain thresholds would apply to FDIC-insured banks. The proposal would not apply to regulatory thresholds spelled out in statute, such as enhanced prudential standards laid out in Dodd-Frank. The proposal covers six rule areas, including bank filing procedures, securities of nonmember banks and state savings associations, restrictions on asset sales from failed institutions, international banking, annual audits and reporting and orderly liquidation authority regulations.
The FDIC on Tuesday also issued a
"The Office would review appeals for consistency with the policies of the FDIC and the
overall reasonableness of, and the support offered for, the positions advanced," an agency memo noted. "Similar to the current SARC Guidelines and the 2021 Office of Supervisory Appeals Guidelines, the Office would make an independent supervisory determination. However, unlike the current Guidelines or the 2021 Guidelines, the proposed Guidelines would specify that the Office will make its determination without deferring to the judgments of either party."
The Office of Supervisory Appeals would be a separate unit within the FDIC, divorced from the divisions that make supervisory decisions. It would be staffed by experienced agency officials serving fixed terms and would report directly to the Chair. The Board would give it authority to review and decide appeals.
The board also approved a
ILCs are a unique state banking charter regulated and insured at the federal level by the FDIC. Like traditional banks, ILCs offer various loan types and deposit accounts. But unlike traditional bank holding companies, the parents of ILCs are exempt from key bank regulations. ILCs are not considered "banks" under the Bank Holding Company Act of 1956 and thus are not subject to prohibitions between banking and commerce, even though ILCs can take consumer deposits and make loans.
While ILCs are prohibited from offering demand-deposits accounts to consumers, they are allowed to offer quasi-demand deposit accounts known as negotiable order of withdrawal accounts. Industrial banks reserve the right to require a seven-day advance notice or more to make the funds in such accounts available to consumers.
Critics of ILCs — including many banks — argue that the accounts are essentially demand deposit accounts, since ILCs may in practice choose to make customer funds available immediately. The Independent Community Bankers of America expressed strong support for the agency's Biden-era rule last year, praising the agency's efforts to strengthen oversight of ILCs and protect financial stability in a
The agency is also
"Although many of the arguments related to ILCs are familiar, sustained interest in the charter by a diverse set of institutions suggests that a wide-ranging RFI would be a helpful step," said Chair Hill. "As I have said previously, I believe our ultimate objective should be a policy statement or similar issuance that provides clarity on how the FDIC interprets the applicable statutory factors in the context of ILC filings."
