Treasury’s Roadmap to Reg Relief

by Rob Nichols
American Bankers Association

There’s a saying in Washington that “personnel is policy.” The truth of that statement is illustrated well by the Treasury Department’s recent report on ways financial regulation can be reformed to promote economic growth.

The long-awaited report, issued in response to the president’s executive order and informed by outreach meetings with community bankers and 10 different ABA white papers, includes more than 100 recommendations for improving banking rules.

While many of the recommendations align with those that ABA and the state associations have long endorsed, perhaps what is most exciting is the fact that 70 to 80 percent of them, by Treasury Secretary Steven Mnuchin’s estimate, can be put into motion by regulators through their independent rulemaking authority. That assumes the regulators agree with the recommendations, of course — and that’s where the “personnel is policy” part comes in.

President Trump is in the process of appointing new leaders at the bank regulatory agencies. While these agencies are and will remain independent, the president will do what all presidents do and nominate qualified, experienced individuals who share his philosophy about regulatory oversight. What’s more, the president has shown no hesitancy in nominating individuals who have actual experience in the field they would be overseeing – like former bank CEO Joe Otting to be the next Comptroller of the Currency. This is a welcome change, in my view. It is simply good public policy to have those with real-world banking expertise at the table when critical regulatory policy is being decided.

Otting, along with Jim Clinger, the president’s nominee to replace FDIC Chairman Marty Gruenberg, and other new leaders to be installed over the next several months, can be expected to embrace and, over time, implement many of the recommendations in Treasury’s report. That makes it a living roadmap with lasting impact – not a pro forma government report that is issued and forgotten.

Among the roadmap’s many recommendations that have the potential to deliver much-needed relief to banks are suggestions to: Exempt community banks from Basel III; address problematic treatment of mortgage servicing assets and commercial real estate loans; ease appraisal requirements in rural areas; increase the threshold for small creditor Qualified Mortgage loans; revisit the volume and nature of supervisory Matters Requiring Attention; more clearly define the Consumer Financial Protection Bureau’s UDAAP standard; streamline the FDIC de novo application process; and revisit the 2013 interagency leveraged lending guidance.

The report also highlights numerous mortgage rules that the CFPB could address on its own, including aligning the QM standard with GSE eligibility requirements, eliminating underwriting requirements that deny mortgages to qualified borrowers, modifying the ability-to-repay calculation to help banks meet the needs of self-employed and non-traditional borrowers, clarifying ongoing problems with the TILA-RESPA integrated disclosures, improving flexibility in the loan originator compensation rule and delaying the Home Mortgage Disclosure Act data expansion.

Other action items, including those requiring legislation, would exempt community banks with less than $10 billion from the Volcker Rule, streamline the stress test process and raise the stress test asset threshold from $10 billion to $50 billion. (For a complete summary of the report, visit

While some are heavier lifts than others, these are all sensible, doable reforms, and that is key. Despite spanning 150 pages, Treasury’s report does not overreach. The recommendations are grounded in common sense, adding to their credibility and enact-ability. That give us hope that community banks, which helped shape this roadmap for relief, will see tangible results in the coming months and years.