By Ben Goad - 09/09/14 06:00 AM EDT
Wall Street is capitalizing on a once-in-a-decade opportunity to stamp out federal regulations.
Banking regulators are systematically reviewing every rule on their books as part of a review required every 10 years by the 1996 Economic Growth and Regulatory Paperwork Reduction Act (EGRPRA).
“The industry has guarded optimism that this will produce some breakthroughs,” said Rob Hatch, an attorney with the Financial Services Roundtable, a powerful Wall Street lobbying group.
The Roundtable, The Independent Community Bankers Association (ICBA) and the National Association of Federal Credit Unions (NAFCU) all filed formal comments in recent days for the first of four tranches of regulations up for review.
The initial phase alone includes hundreds regulations prescribed by the Office of the Comptroller of the Currency, Federal Deposit Insurance Corporation and the Board of Governors of the Federal Reserve System.
Regulators are expected to solicit feedback for a second tranche of rules by December, with the last two tranches coming next year. Each will be accompanied by a 90-day public comment period.
While aggressively engaging in the process, industry groups say their enthusiasm is tempered by memories of the inaugural review a decade ago.
Recalling that business groups were “sufficiently riled up” at the prospect of paring down regulations, Chris Cole, senior regulatory council for the ICBA, said the first go-round left the industry “thoroughly disillusioned.”
“Nothing substantive got eliminated by this whole process,” he said.
Business groups have complained for decades about the accumulation of federal rules — thousands are added each year but few are ever removed. Absent third-party review, regulators are generally averse to undoing their handiwork, the groups say.
That holds true for the EGRPRA process, Hatch said.
“It’s very easy to stop any changes when you have three regulators with different turf and they want to ensure their voices are heard,” he said.
Financial reform advocates are adding their voices to the mix to argue against any moves to significantly relax regulations.
Outnumbered and outspent by the formidable Wall Streets lobbying apparatus, public interest groups have been fighting in the trenches against industry’s efforts to loosen — or altogether block — the scores of regulations ordered up by Dodd-Frank.
Now they must contend with a regulatory process specifically designed to thin out the federal rulebooks. In comments filed to regulators, the National Consumer Law Center (NCLC) warned against a one-sided look at existing regulations.
“The review process is not really designed to solicit both sides of the story,” NCLC Associate Director Lauren Saunders said.
Consumer and public interest groups say they fear regulators will be worn down by the constant drumbeat of criticism, even after a global economic crisis viewed by some as the natural consequence of insufficient regulation.
Marcus Stanley, policy director for the group Americans for Financial Reform, said Dodd-Frank rules should be off-limits in the review. Following a years-long fight over the statute, many of the rules remain incomplete or have not been in place long enough to assess their merit, he argued.
It would be “crazy just to turn around and re-litigate them,” Stanley said.
The first round of comments centered on regulations related to application and reporting requirements, powers and activities and international operations.
Among the litany of recommendations put forward was an overhaul of rules governing “call reports” that must be submitted to regulators four times a year.
Financial groups complain that increasing layers of red tape have more than doubled the number of pages that must be completed from 29 to 80 — not to mention almost 700 pages of related instructions.
The groups are also calling on regulators to revisit century-old requirements related to publishing certain notices in newspapers to apprise the public of mergers, corporate restructuring or other changes.
Given changes in technology, the requirement could be deemed obsolete, the groups said.
The weightiest issues in the review, including rules related to securities and bank capital requirements, will be addressed in the later stages of the process.
Both financial and public interests groups say it unclear how ambitious regulators plan to be.
“Certainly we would take it even more serious if we got signals from the banking [agencies],” Cole said. “I still feel like this is just a check-the-box routine at this point.”
Part of the industry skepticism is rooted in the Consumer Financial Protection Bureau’s exemption from the review process. The CFPB, a product of Dodd-Frank, didn’t exist when Congress mandated the review, and it faces separate requirements for revisiting regulations.
But the Financial Services Roundtable contends that the CFPB should agree to participate, given that its jurisdiction includes regulations that pre-date its creation and have major implications for banks.
The CFPB’s separate review could create a disconnect between regulators and their interrelated missions, the financial industry says.
“The big concern of the industry is that the CFPB doesn’t become a lone wolf regulator that isn’t speaking with the rest of the agencies,” Hatch said.
Despite the misgivings, industry pressure on the agencies is likely to intensify in the coming months, with the upcoming solicitation of comments for the reams of federal rules awaiting review.
Business groups have little to lose and, potentially, much to gain from a full-court press on regulators. Carrie Hunt, the NAFCU’s general counsel, said the group was moving forward with the expectation that it’s a worthwhile exercise.
“I really think it’s an effort to get some unnecessary regulations off the books,” she said.