Recent conversations on regulations – along with the new administration – has centered on reducing regulations. For years, the government has been adding to the mountain of regs – will they stop now? Some housecleaning is possible, especially when federal courts step up to say that the most powerful regulator is operating unconstitutionally. The CFPB earned that distinction and we can expect remediation somewhere between reforming the CFPB to function the way other agencies do – to a whole new agency to replace it (The CHOICE Bill).
If you listen closely, reform is centered on “new” regulations, Dodd-Frank and the five years after that. The other point to remember is that the real discussion is about enforcement. Many of the laws that piled up were passed years ago – some 30-50 years ago. Most importantly, regulators are primarily enforcers, although the last few years have revealed the unfortunate rise of using enforcement to create guidelines and to have the effect of creating new rules, more regs.
The likely change is in how enforcements occur (meaning politically). Enforcement priorities become political strategies, approximately 99% of the time (immigration is an example, and the apparent assault on SMBs and small banks). All administrations experience this; a former member of President Obama’s White House Legal Office said, in a related webinar, that the primary task of the Legal Office was to ensure that political agendas were followed – on where to spend time on enforcement and which regs and laws to avoid (e.g., immigration laws).
No rollback is expected in banking regs but simplifying and maybe an easing of the process for smaller banks could happen. In February, new Treasury Secretary Mnuchin said, “We want good, sound banking regulations but we also want to see economic growth. We’re behind banking regulations but want to see the banks lending. Treasury wants to see all the agencies working together cooperatively, the CFPB, OCC, FDIC. We look for more clarity around the rules.” Asked about the Volker Rule, Mnuchin said, “We need clarity here and we’re concerned where the Rule hurts liquidity.”
The constant growth of cyberattacks likely means no rollback on regs or provisions that were passed to protect banking and financial systems from cyberattack, terror financing, BSA, AML, CTR, etc. In other words . . . security or cyberattack related? It stays in place.
Insiders expect a major strategy will simply be to adopt a slower pace in all areas . . . when this is added to the ordinary political difficulties in repealing or replacing current laws and regs, as well as developing NEW regs and guidelines, the end result is an easing of regulatory compliance.
The “rollback” conversation only applies to the U.S. There’s significant regulatory change happening globally, with end effects that will be felt here.
In the current administration, examples could include regs seen as stifling to small business growth or the jobs market being ignored or minimized. Or if immigration is seen as hurting jobs for Americans, then legal immigration may be more vigorously enforced. The carrot and the stick – both in the picture.
OIRA can eat up a lot of time. The OIRA (Office of Information and Regulatory Affairs) oversees the implementation of government-wide policies and reviews draft regulations. OIRA reviews 500-1,000 requests annually, considers alternatives and impact analysis, both benefits and costs. In 10 years, OIRA altered 84 percent of EPA rule submissions. Other review bodies and activities include:
HERE ARE IDEAS FOR BEING PRO-ACTIVE . . . and ANTI-REG
Contact your senators and representatives to encourage action on dialing down the power of the CFPB (remember they’ve been found to be unconstitutional).
Partner with your regulator, request to do something in the grey region and see if they’re send you a “Non-objection Letter.”
For something new (finTECH?) request to go in the sandbox, experiment, request (rent) a temporary charter.
Remember, self-reporting will often save you a LOT of money in fines and civil penalties.
It’s not Bobby McFerrin time (Don’t Worry – Be Happy) and we all need to remember that doing nothing is doing something, it’s risky and potentially very expensive to ignore violations.