40 SEPTEMBER / OCTOBER 2017 FEATURE Article author Robert S. Nichols President and CEO American Bankers Association nichols@aba.com There’s a saying in Washington that “personnel is policy.” The truth of that statement is illustrated by the Department of the Treasury’s recent report on ways financial regulation can be reformed to promote economic growth. The long-awaited report, issued in response to the president’s executive order and informed by outreach meetings with community bankers and 10 different American Bankers Association white papers, includes more than 100 recommendations for improving banking rules. While many of the recommendations align with those that ABA and the state associations have long endorsed, perhaps what is most exciting is the fact that 70 to 80 percent of them, by Treasury Secretary Steven Mnuchin’s estimate, can be put into motion by regulators through their independent rulemaking authority. That assumes the regulators agree with the recommendations, of course – and that’s where the “personnel is policy” part comes in. President Trump is in the process of appointing new leaders at the bank regulatory agencies. While these agencies are and will remain independent, the president will do what all presidents do and nominate qualified, experienced individuals who share his philosophy about regulatory oversight. What’s more, the president has shown no hesitancy in nominating individuals who have actual experience in the field they would be overseeing – such as former bank CEO Joe Otting to be the next Comptroller of the Currency. This is a welcomed change. It is simply good public policy to have those with real-world banking expertise at the table when critical regulatory policy is being decided. Otting, along with Jim Clinger, the president’s nominee to replace FDIC Chairman Marty Gruenberg, and other new leaders to be installed over the next several months, can be expected to embrace and, over time, implement many of the recommendations in Treasury’s report. That makes it a living roadmap with lasting impact – not a pro forma government report that is issued and forgotten. Among the roadmap’s many recommendations that have the potential to deliver much-needed relief to banks are suggestions to: • Exempt community banks from Basel III; • Address problematic treatment of mortgage servicing assets and commercial real estate loans; • Ease appraisal requirements in rural areas; • Increase the threshold for small creditor Qualified Mortgage loans; • Revisit the volume and nature of supervisory Matters Requiring Attention; • More clearly define the Consumer Financial Protection Bureau’s UDAAP standard; • Streamline the FDIC de novo application process; and • Revisit the 2013 interagency leveraged lending guidance. The report also highlights numerous mortgage rules that the CFPB could address on its own, including aligning the QM standard with GSE eligibility requirements, eliminating underwriting requirements that deny mortgages to qualified borrowers, modifying the ability-torepay calculation to help banks meet the needs of self-employed and Treasury’s Roadmap to Reg Relief
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