The U.S. Government Accountability Office (GAO) found weaknesses in how financial regulators comply with the Regulatory Flexibility Act (RFA).
Federal financial regulators — the Board of Governors of the Federal Reserve System, Office of the Comptroller of the Currency, Federal Deposit Insurance Corporation, Securities and Exchange Commission, Commodity Futures Trading Commission, and Consumer Financial Protection Bureau — must comply with RFA when drafting and implementing regulations.
The RFA requires agencies to determine a rule’s economic impact on small entities, explore regulatory options for reducing any significant economic impact on a substantial number of such entities, and explain their ultimate choice of regulatory approach.
The GAO report looks at how financial regulators performed required RFA analyses and set procedures for complying with RFA requirements. Typically, it will assess the rule’s potential impact on small entities and consider alternatives that may minimize those impacts. Or, the agencies may find that a rule would not have a significant economic impact.
The GAO report found that all but one of the financial regulators have guidelines for RFA requirements, however, they have not developed specific policies and procedures to assist staff in complying with RFA.
By not developing policies and procedures for RFA analyses, regulators’ ability to consistently and effectively meet RFA objectives may be limited.
GAO made 10 recommendations, specific to each of the six federal financial regulators, to help them better comply with the RFA. Among them, they recommend that regulators develop and implement specific policies and procedures for consistently complying with RFA requirements and related guidance for conducting RFA analyses. Five of the agencies agreed with the recommendations, while one did not provide written comments.