The House passed a bill this week that requires regulators to tailor regulations to better fit a bank or credit union’s risk profile and business model.
U.S. Rep. Scott Tipton (R-CO) sponsored the bill, the Taking Account of Institutions with Low Operational Risk (TAILOR) Act (H.R. 1116), which passed in the House 247-169.
“Since the Dodd-Frank Act was enacted in 2010, banks and credit unions have been regulated under a one-size-fits-all approach, regardless of size or risk profile,” Tipton said. “The compliance costs imposed by these one-size-fits-all regulations have placed a heavy burden on smaller financial institutions, who have far fewer resources available for compliance than larger institutions. By requiring regulators to consider the cost of compliance on smaller institutions, the TAILOR Act will go a long way towards allowing small banks and credit unions to use their resources to better serve their customers, rather than on excessive compliance regulations. In turn, the TAILOR Act will help community financial institutions focus once again on generating economic growth and creating greater opportunities in their communities.”
Specifically, the TAILOR Act would require the federal financial regulatory agencies to tailor any regulatory action to appropriately apply to banks and credit unions. That means requiring regulators to consider risk profile and business model of the institutions to determine the necessity, appropriateness, and impact of applying such regulatory action to those institutions.
Further, regulatory agencies must testify before the House Committee on Financial Services and the Senate Banking Committee annually on the specific actions taken to tailor the agency’s actions. It also mandates that federal financial regulatory agencies all regulations to apply the requirements of this bill to regulations adopted over the last seven years.