Virtual Hearing - Oversight of Prudential Regulators: Ensuring the Safety, Sound... (EventID=112590)

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Connect with the House Financial Services Committee Get the latest news: https://financialservices.house.gov/ Follow us on Facebook: https://www.facebook.com/HouseFinancialCmte Follow us on Twitter: https://twitter.com/FSCDems ___________________________________ On Wednesday, May 19, 2021, at 10:00 a.m. (ET) full Committee Chairwoman Waters and Ranking Member McHenry will host a virtual hearing entitled, “Oversight of Prudential Regulators: Ensuring the Safety, Soundness, Diversity, and Accountability of Depository Institutions." - - - - - - - - Witnesses for this one-panel hearing will be: • The Honorable Todd Harper, Chairman, National Credit Union Administration • Mr. Michael Hsu, Acting Comptroller of the Currency, Office of the Comptroller of the Currency • The Honorable Jelena McWilliams, Chairman, Federal Deposit Insurance Corporation • The Honorable Randal Quarles, Vice Chairman of Supervision, Board of Governors of the Federal Reserve System Overview Prudential regulation of insured depository institutions is divided among four Federal regulators consisting of the Board of Governors of the Federal Reserve System (Fed), Federal Deposit Insurance Corporation (FDIC), Office of the Comptroller of the Currency (OCC), and the National Credit Union Administration (NCUA). According to the FDIC, there were 5,001 FDIC-insured banks as of December 31, 2020. Most of these institutions are community banks; for example, 4,850 of these banks held less than $10 billion in total assets (97 percent). Between the end of 2019 and the end of 2020, these banks made $147.9 billion in profits and total assets rose by more than $3.2 trillion (17.4% increase) to nearly $21.9 trillion. Total loans and leases outstanding held by these banks at the end of 2020 increased to $10.8 trillion (3.3% increase). According to the NCUA, there were 5,099 NCUA-insured credit unions with 124.9 million members as of December 31, 2020. Most credit unions tend to be similar in size to small banks. At the end of 2020, 90% of credit unions had less than $689 million in assets.4 During 2020, credit union assets increased 17.7% to $1.84 trillion. Total loans outstanding held by these credit unions increased to $1.16 trillion (4.9% increase). Diversity in Banking As required by Dodd-Frank, each prudential regulator maintains an Office of Minority and Women Inclusion (OMWI) and reports annually to Congress on their activities. Additionally, in February 2020, Committee staff released a report on the diversity and inclusion data and practices at America’s largest banks.6 The report noted that banks generally lacked diversity in their senior ranks, corporate boards, and provided limited data on their investment with diverse-owned firms. Furthermore, as of December 31, 2020, there were 142 minority depository institution (MDI) banks and 520 MDI credit unions, which represents a decline of roughly one-third of these institutions over the past decade. As part of the Consolidated Appropriations Act for 2021 enacted into law in December 2020, Congress provided $12 billion in capital investments and grants to support MDIs and CDFIs and the communities they serve. Pandemic Response by Prudential Regulators At the onset of the COVID-19 pandemic, banking regulators began encouraging financial institutions to work with customers affected by the COVID-19 pandemic.10 In addition, the agencies have issued multiple guidance on how banks should report on and account for loans that become nonperforming during the pandemic. A March 22, 2020 interagency statement clarified that loan modifications should not automatically be characterized as troubled debt restructurings (TDRs)—an accounting standard indicating the loan is impaired, which requires additional loss reserves be held against it.11 Subsequently, the CARES Act was enacted, and Section 4013 requires federal depository regulators to allow lenders to suspend certain accounting requirements related to loan modifications and TDR classification. Moreover, Section 4022 of the CARES Act establishes consumer rights to be granted forbearance for federally insured mortgages. On April 3, 2020, bank regulators issued guidance encouraging mortgage servicers to place consumers in short-term forbearance programs, consistent with the CARES Act provision, stating that they are taking a “flexible supervisory and enforcement approach” to ensure that servicers are able to do this without further straining their operational capacity. Under the Dodd-Frank Act, the largest banks face more complex and stringent regulations than other banks. Regulators have delayed or relaxed a number of regulations that apply to the largest banks in response to COVID-19. However, experts cautioned that lower capital requirements, along with continued dividend payments weaken the safety and soundness of the banking system at a critical time... Hearing page: https://financialservices.house.gov/calendar/eventsingle.aspx?EventID=407752