Trump Administration Plan for Financial Regulation Includes Reducing Regulatory Compliance Activities for Bank Boards
The U.S. Department of the Treasury today issued its first in a series of reports to President Donald J. Trump examining the United States’ financial regulatory system. Appendix B to the report includes 16 pages of detailed recommendations, noting which actions do not require further legislation. The action is not meant to displace the Financial Choice Act intended to roll back Dodd-Frank that was passed by the House.
This report was prepared in response to an Executive Order which enumerated certain core principles for financial regulation. The report notes that there are over 800 provisions in law, regulation, and agency guidance that impose obligations on bank Boards. Treasury believes this volume crowds out time that should be allocated to oversight of the enterprise’s business risk and strategy. The report also notes there is a considerable volume of non-strategic regulatory matters requiring Board attention that has the impact of blurring the appropriate line between management and Board duties. Finally, the report asserts there is little coherence in the panoply of requirements imposed on Boards by various financial regulators, on top of federal and state statutory requirements.
According to the report this has resulted in significant overlap, a lack of thoughtful coordination of aggregate requirements and expectations, and a lack of periodic review or reassessment of the impact of aggregate requirements placed on Boards. This has a particularly negative impact on mid-size and smaller banking organizations. The Trump administration believes duties imposed on Boards are too voluminous, lack appropriate tailoring, and undermine the important distinction between the role of management and that of Boards of Directors. A significant shift in the nature and structure of Board involvement in regulatory matters could be made with little or no increase in risks posed to the financial system. In fact, allowing Boards to fulfill a clearer set of agreed duties, per an enterprise’s corporate governance model, would reduce risk by restoring their appropriate governance authority. Treasury recommends an inter-agency review of the collective requirements imposed on Boards in order to reassess and better tailor these aggregate expectations and restore balance in the relationship between regulators, Boards, and bank management.