On June 12, 2017, The U.S. Department of the Treasury issued its first in a series of reports to President Trump examining the United States’ financial regulatory system and detailing executive actions and regulatory changes that can be immediately undertaken to provide regulatory relief for U.S. financial institutions.
Treasury issued the report with a press release that stated, “Properly structuring regulation of the U.S. financial system is critical to achieve the administration’s goal of sustained economic growth and to create opportunities for all Americans to benefit from a stronger economy,” said U.S. Treasury Secretary Steven T. Mnuchin. “We are focused on encouraging a market environment where consumers have more choices, access to capital and safe loan products – while ensuring taxpayer-funded bailouts are truly a thing of the past.”
As background, over the past four months, Secretary Mnuchin and other Treasury officials met with hundreds of stakeholders across the financial ecosystem, including Nacha; community, independent, regional and large banks; regulators; FSOC members; consumer advocates; academics; analysts and investors. These listening sessions provided a picture of redundancy, fragmentation, and challenges in the regulatory framework.
The report issued today detailed the following findings:
- Community financial institutions – banks and credit unions – are critically important to serve many Americans
- Capital, liquidity and leverage rules can be simplified to increase the flow of credit
- We must ensure our banks are globally competitive
- Improving market liquidity is critical for the U.S. economy
- The Consumer Financial Protection Bureau must be reformed (suggested a legal change allowing the president to fire the bureau's sole director, or said the agency could be restructured into a multiperson commission)
- Regulations need to be better tailored, more efficient, and effective
- Congress should review the organization and mandates of the independent banking regulators to improve accountability
The report also recommended that banks with fewer than $10 billion in assets be exempt from the Volcker rule, along with larger banks that either have a smaller trading portfolio or a higher capital level. It also included provisions to strengthen community bank mortgage lending, ease commercial lending rules that harm small businesses’ and consumers’ ability to borrow.
The next step will be that Treasury and the Administration will begin working with Congress, independent regulators, the financial industry, and trade groups to implement the recommendations advocated in the report through changes to statutes, regulations and supervisory guidance.
On a side note but related to the report: The Senate Banking Committee will hold a hearing with financial regulators on June 22, 2017 to discuss economic growth.