Another top regulator expressed support Thursday for easing the regulatory burden on small banks.
Speaking at a conference for community bankers Thursday morning, Federal Reserve Governor Daniel Tarullo said that regulators should aim to lower capital requirements for small banks, and expressed support for some legislative relief from banking laws for those firms.
It is “worthwhile for the bank regulatory agencies to consider possibilities for a broader simplification of capital requirements for smaller community banks,” Tarullo said.
Tarullo leads the central bank on bank regulation, second only to Fed Chairwoman Janet Yellen. His talk Thursday echoed recent expressions of support by other top supervisors for regulatory relief for community banks, and comes as Congress is working on a regulatory relief bill.
Big banks are capable of taking down the entire financial system if they fail, but small banks that provide simple services for regional customers do not, Tarullo said Thursday.
“We need to tailor prudential regulations and supervisory practices” to distinguish between megabanks and community banks, he said.
One possibility Tarullo mentioned was to allow small banks to trade a complicated set of capital requirements that requires a lot of paperwork for a simpler set that includes higher minimum capital levels. Smaller banks already tend to have higher capital levels, he noted, meaning that such a switch could be relatively painless.
Tarullo also hinted at simplifying regulatory reporting and examinations for community banks.
He also reiterated support for Congress to revise some aspects of the 2010 Dodd-Frank financial reform law that impose burdens on small banks.
Key lawmakers have been working toward a legislative package that would provide relief for small banks from the law’s provisions. That effort has been slowed by resistance from some Democrats who have expressed fears that the legislative initiative might be used to ease rules on megabanks.
Speaking at the same Independent Community Bankers of America event Wednesday, Senate Banking Committee Chairman Richard Shelby told the bankers that “I’m trying to be your friend. I’m trying to give you some relief, and together maybe we can get there.”
