The Wall Street Journal: New FDIC leader joins push to re-evaluate banking rulebook

The Wall Street Journal, August 6, 2018: New FDIC leader joins push to re-evaluate banking rulebook

WASHINGTON—Washington’s newest senior bank regulator is turning her agency’s agenda in the direction of policies being proposed by other Trump-appointed officials, adding momentum to a push to revisit rules adopted after the 2008 financial crisis.

Federal Deposit Insurance Corp. Chairman Jelena McWilliams, in her first interview since being sworn in June 5, said she is ready to re-evaluate rules on bank capital, small-dollar loans and investments in low-income areas.

Like other bank regulators, Ms. McWilliams has broad discretion to rewrite rules for the companies she oversees, using authority from the 2010 Dodd-Frank financial overhaul and other laws. The Republican-controlled Congress earlier this year passed a law calling for easing banking rules, especially for small lenders. But much of Dodd-Frank remained intact, leaving the Trump administration’s financial-regulatory overhauls to be carried out largely by bank regulators such as Ms. McWilliams.

Ms. McWilliams said Friday that her top priorities are examining the regulatory burden on small banks, speeding up her agency’s review of bank-charter applications and helping banks introduce new financial products for underserved communities.

“There should be pilot programs where the regulators and the banks work together” to allow testing of new products, she said, echoing a recent Treasury Department proposal to create regulatory “sandboxes” for experimentation.  “If we can create a framework where that green light is given in a way that is safe for the consumers, why not?”

Ms. McWilliams, a 44-year-old former bank lawyer and congressional staffer, is the last of the bank regulators nominated by President Trump to assume their posts. Her installation follows top appointments to the Federal Reserve, Office of the Comptroller of the Currency and Consumer Financial Protection Bureau. Her predecessor, Martin Gruenberg, was named by President Barack Obama and remains on the FDIC’s board of directors, with an office down the hall from hers.

Ms. McWilliams has replaced Mr. Gruenberg’s baseball memorabilia with banking artifacts and a “Keep Calm and Carry On” sign. She also is reversing Mr. Gruenberg’s reluctance to tinker with bank-capital requirements.

“I think it is appropriate for the three banking agencies to sit down and take a look at the capital [rules] with a new eye,” she said, adding that rules for both small and big banks should be on the table. “Is it doing what we intended for it to do?”

She declined to take positions on rule changes proposed before her arrival, such as an April proposal to loosen a capital rule known as the leverage ratio, which requires banks to maintain minimum levels of equity funding as percentage of assets.

The Fed and OCC endorsed the proposal, but Mr. Gruenberg opposed it. The three agencies share oversight of U.S. banks.

Ms. McWilliams said she asked staff for data explaining the FDIC’s position on the matter. “The preference would be that we are able to move forward all three together,” she said, referring to the three banking agencies.

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