Tackling the Issues
Reich, John, Independent Banker
OTS director addresses regulatory relief, Basel and FHLBank registration
The following excerpts are from remarks given by Office of Thrift Supervision Director John Reich before the Independent Bankers Association of New York.
As many of you know, in 2003, FDIC Chairman Powell asked me to lead an interagency effort, pursuant to the Economic Growth and Regulatory Paperwork Reduction Act (EGRPRA), to eliminate regulatory requirements that are outdated, unnecessary or unduly burdensome. I am continuing to oversee this effort as director of OTS.
During the past two years, I have conducted 16 outreach meetings with banks and thrifts, and consumer and community groups, including several meetings with both industry and consumer/community groups in attendance. In each of these meetings, I have asked participants to identify regulatory requirements that they believe are outdated, unnecessary or unduly burdensome.
As a result of these efforts, a growing number of legislative items and issues have gained support, and we hope to continue to add more as the participating agencies identify consensus provisions.
The House Financial Services Committee unanimously approved its regulatory relief bill, H.R. 3505. I have worked closely with the House bill's sponsor, [Rep.] Jeb Hensarling [R-Texas] and others, on a number of the provisions included in H.R. 3505. There are many good things in H.R. 3505, including relief from filing currency transaction reports for institutions' regular customers. This has been a relief provision in the works for some time and, hopefully, it will soon be enacted into law.
H.R. 3505 would also raise the small bank threshold for the 18-month exam cycle from $250 million to $1 billion. There are many similar provisions that individually do not appear to be particularly compelling regulatory burden relief items. But, H.R. 3505 does, in fact, accomplish an across-theboard reduction in the burdens that you face today.
I believe, in the aggregate, the bill contains some real regulatory relief.
We're also doing what we can at the agency level to provide regulatory relief on our own. Last week, the FDIC board, of which I am still a member, approved a Final Rule to amend the FDIC's Annual Independent Audit and Reporting rules, under the FDIC's Part 363, raising the asset exemption threshold from $500 million to $1 billion.
This means institutions of $1 billion or less will no longer have to:
* Provide a management report concerning the effectiveness of the institution's internal controls over financial reporting and its compliance with safety and soundness laws;
* Obtain an independent public accountant's attestation on management's internal control attestation; and
* Establish an audit committee comprised of outside directors who are completely independent of management-the requirement is modified to require only a majority of the audit committee to be independent.
We are continuing to work on identifying areas to provide regulatory burden relief on our own. And I encourage you to continue to contact me with any additional ideas or suggestions you may have.
Let me now turn to Basel. Having just returned from speaking to an International Forum in Brussels, I have a heightened awareness of the zeal that European bank supervisors have for the speedy implementation of Basel II.
I've learned some things. For one thing I learned that all of the banks in the European Union- 100 percent of them, comprised of about 10,000 banks in all- plan to adopt and operate under Basel II. The difference is that the part of Basel II that most of them are adopting is called the standardized approach to capital determination, and it is a significantly more simplified calculation of capital than the internal ratings based approach our largest institutions are adopting.
For the largest and most sophisticated banks, and especially those that operate internationally, Basel II may be the most appropriate capital framework. …