The Financial Services Subcommittee on Financial Institutions and Consumer Credit recently conducted a hearing focusing on small business credit access.
Officials said the effort also provided insight regarding de-risking, a scenario limiting the ability of legitimate small businesses to obtain financing.
“Like many of my colleagues, I’ve heard from too many people who have lost access to financial services,” Rep. Blaine Luetkemeyer (R-MO), the subcommittee chairman, said. “The committee secured House passage of my Financial Institutions Customer Protection Act, which would help curb de-risking by requiring federal banking agencies to establish a transparent process by which account termination requests and orders must be made.”
Luetkemeyer said efforts to examine the root causes of de-risking and its implications on the economy, both at home and abroad, must continue.
“State regulators focus on tailored supervision,” Bryan A. Schneider, secretary of the Illinois Department of Financial & Professional Regulation, said on behalf of the Conference of State Bank Supervisors. “Consistent with this approach, my view is banks should be responsible for managing the risks of their business relationships, and my role as a bank regulator is to ensure that each of our supervised banks understands and can manage these risks.”
Officials said de-risking occurs when a financial institution terminates relationships and closes the accounts of clients and merchants they deem high risk in order to avoid legal liability and greater regulatory scrutiny.