Should Financial Regulators Tailor Rules to Limit the Burden on Smaller Banks & Credit Unions? (H.R. 1116)

What is H.R. 1116?

(Updated April 13, 2018)

This bill — the TAILOR Act — would require federal financial regulatory agencies to tailor their regulatory actions so as to limit the burdens on the institutions involved given their risk profiles and business models, such as smaller community banks or credit unions. Regulators would be required to report to Congress on specific actions taken to tailor rules.This requirement would apply to future regulatory actions in addition to rules adopted within the last seven years.

The bill's full title is the Taking Account of Institutions with Low Operation Risk (TAILOR) Act.

Argument in favor

The compliance costs of Dodd-Frank’s one-size-fits-all regulations are crushing many of America’s smaller community banks and credit unions. This bill ensures that regulations take into account the risk profiles and business models of smaller institutions to limit the burden on them.

Argument opposed

Financial regulators and Congress already take steps to tailor rules so they don’t create an excessive burden on small financial institutions. This bill goes too far, and if enacted would lead to endless legal challenges of recent and future rules.

Impact

Smaller financial institutions; and federal financial regulators.

Cost of H.R. 1116

The CBO estimates that enacting this bill would cost $80 million over the 2018-2027 period.

Additional Info

In-Depth: Sponsoring Rep. Scott Tipton (R-CO) introduced this bill to require that regulations be tailored to fit smaller financial institutions’ business models and risk profiles:

“Under Dodd-Frank rules, banks and credit unions are currently regulated under a one-size-fits-all approach regardless of size or risk profile. As a result, regulations designed and intended for big banks are also applied to small community and independent banks or credit unions. The compliance costs associated with these one-size-fits-all mandates are often unworkable for small community banks, which often don’t have the employees or resources to meet the compliance obligations. Regulations play an important role in keeping our communities safe and secure, but they should be tailored to meet the risk profile and business model of specific institutions. The TAILOR Act would allow federal regulators to better focus their oversight efforts, and allow small banks and credit unions to focus their time and assets on investing in their communities, helping to generate economic growth and job opportunities.”

Most House Democrats opposed this bill in committee, explaining in its committee report:

“Congress has carefully monitored the implementation of the Dodd-Frank Act and, when warranted, has passed targeted legislation or encouraged regulators to further tailor rules to reduce unnecessary compliance requirements on community financial institutions while maintaining robust standards and appropriate protections that are in the public interest… We share the belief that regulators must take into account, and tailor rules, for smaller sized institutions when appropriate. Unfortunately, the TAILOR Act would only serve to put consumers and the financial system at risk by subjecting important regulations to endless litigation.”

This legislation passed the House Financial Services Committee on a 39-21 vote and has the support of 85 cosponsors in the House, including 80 Republicans and five Democrats.

Media:

• Sponsoring Rep. Scott Tipton (R-CO) Press Release
  
• NAFCU (In Favor)