Rep. Scott Tipton (R-Colo.) has introduced a bill, the TAILOR Act (H.R. 2896), that would require financial regulators to consider bank risk profiles and business models when taking regulatory action. The bill, which was co-sponsored by Rep. Andy Barr (R-Ky.) was referred to the House Financial Services Committee on June 25.
The TAILOR Act stands for “Taking Account of Institutions with Low Operation Risk Act of 2015” and would require federal regulators to do the following befor any regulatory actions:
- Take into consideration the risk profile and business models of the various institutions or classes of institutions subject to the regulatory action;
- Determine the necessity, appropriateness and impact of applying such regulatory action to such institutions or classes of institutions; and
- Tailor such regulatory action applicable to such institutions or class of institutions in a manner that limits the regulatory compliance impact, cost, liability risk and other burdens as is appropriate for the risk profile and business model involved.
Without specifically calling for a cost-benefit analysis, the bill does propose that regulators take other matters into consideration when formulating regulations, including the impacts (by itself and in the aggregate) that regulations would have on the ability of financial institutions to “flexibly serve evolving and diverse customer needs,” the potential unintended impact of examination manuals or other regulatory directives that conflict with tailoring regulations and the underlying policy objectives and statutory scheme of the regulation.
Additionally, with every proposed rulemaking and any final rulemaking, regulators would be required to disclose its assessments.
“This type of smarter regulation would help America’s hometown banks by freeing up resources so they can better serve their customers and communities,” American Bankers Association President and CEO Frank Keating said. “We appreciate this bill’s measured approach that empowers regulators to focus on real risks rather than compliance exercises.
“Many regulations have been indiscriminately applied to the whole industry whether or not they make economic or practical sense. Regulators should be empowered — and directed — to make sure that rules, regulations and compliance burdens fit the various segments of the industry appropriately,” he said.
The bill also would require a review of regulations issued in the past five years and a report on how they might be better tailored. Regulators would be required to state in notices of proposed rulemaking how they applied the TAILOR Act.