WASHINGTON Federal Reserve Board Chair Janet Yellen on Thursday emphasized the importance of tailoring new rules meant to curb risks by the largest banks to smaller-sized institutions.
"We are taking a fresh look at how we supervise community banks and possible ways that supervision can be smarter, more nimble, and more effective," said Yellen, in prepared remarks, at the Independent Community Bankers of America conference. "We know that a one-size-fits-all approach to supervision is often not appropriate."
Since the enactment of the Dodd-Frank Act in 2010, regulators have striven to ensure they understand the impact new regulations have on community banks, and have actively engaged in outreach with bankers on Main Street.
Yellen called for taking a "disciplined approach" in understanding how supervisory policies should apply to community banks, including determining whether or how a proposal should be imposed on a smaller bank.
Sometimes, she said, it may not be prudent to exclude community banks from certain requirements, but in those cases regulators can work to scale expectations to the size and complexity of the supervisory portfolio, to minimize the burden where possible and appropriate.
Specifically, Yellen mentioned the work the Fed is doing to advocate on behalf of community banks over upcoming changes to the accounting standard for credit losses on loans and securities.
Community bankers have been concerned that overly complex accounting rules would increase costs without providing any benefit for those that use community bank financial statements.
"We are working with the Financial Accounting Standards Board (FASB) to help ensure that the new standard, which is an important component of financial reform efforts, can be implemented in a reasonable and practical way for community banks," said Yellen.
The Fed chair said she expects the final standard to permit loss-estimation techniques that build upon credit risk management measures used by community banks.