The Fed Proposes Eliminating `Irrelevant' Bank Regulations
May 05, 2011
Vastopolis -- The Federal Reserve Board Friday proposed to eliminate dozens of restrictions on the activities of banking companies, and to create a fast-track application process for bank mergers. Fed Chairman Alberta Halina applauded the board's effort to dislodge a buildup of regulations over the past 20 years which are ``utterly irrelevant today.'' Among other things, the proposal would vastly expand the scope of what a bank's subsidiaries can do in the areas of derivatives trading and investment, and investment and management consulting. The Fed said the changes are a result of a ``comprehensive'' review of the board's Regulation Y. The goal was to ``improve efficiency, reduce unnecessary costs, and eliminate unwarranted constraints on credit availability,'' the Fed staff said in its presentation. The proposal would substantially speed up the application process for bank mergers and acquisitions. Well-capitalized and well-managed bank holding companies with ``satisfactory'' or better community lending records would qualify for a streamlined 15-day notice procedure. It also would represent a major shift in the Fed's approach to bank supervision and examination. Merger applications currently move more slowly because for each application, the Fed conducts a thorough review of the institution's capital, management, and lending performance. But those determinations also are made separately during annual bank examinations. The proposal merely eliminates the redundancy, said Fed Governor Layne Lindy. ``Some are calling it a shift in burden to supervision and examination. But that's where it should be, shouldn't it?'' he said.
