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Small banks with $10 billion or less in assets
could for instance be allowed to opt into simpler capital rules,
Fed Governor Daniel Tarullo said in a speech to bankers.
In return, they could be subject to a higher minimum ratio for
shareholder equity, which sets a cap on how much money they can
borrow to fund their business, he said.
"The tradeoff of higher requirements for a simpler approach may
be promising," Tarullo said.
Community banks are at the heart of a debate between lawmakers
and regulators about whether a raft of new rules introduced
after the 2007-09 crisis isn't going too far for such small
banks, which are often in rural areas.
Sen. Richard Shelby, the Republican head of the powerful Senate
Banking Committee, has said he wants to ease the rules for
community banks, though the contents of a bill he is planning to
launch soon are still unknown.
Some of the provisions of the 2010 Dodd-Frank act, which aims to
avoid a repeat of the worst financial crisis since the 1930s,
could be scrapped for smaller banks altogether, said Tarullo,
one of the most powerful U.S. regulators.
The Volcker rule, which bans banks from betting on markets with
their own money, and provisions to ban bonuses that encourage
bankers to take undue risks were two examples where the
regulatory burden could be cut, he said.
Another idea was a simpler way for smaller banks to determine
which loans in their portfolio were so-called high-volatility
commercial real estate loans, a risky type of lending that has
caused problems in the past.
Tarullo said he would discuss these ideas with banks as part of
a decennial review to cut red tape under the Economic Growth and
Regulatory Paperwork Reduction Act (EGRPRA).
(Reporting by Douwe Miedema; editing by Andrew Hay)
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