U.S. House Financial Services Committee holds hearing on bank supervision accountability and regulatory tailoring for community banks

The U.S. House Financial Services Committee’s Financial Institutions Subcommittee held a hearing to explore reforms aimed at increasing accountability in bank supervision and improving interagency coordination, with Subcommittee Chair Andy Barr framing the agenda around reducing compliance burdens for community banks and strengthening the objectivity of supervisory processes. Barr argued that community banks were swept into post-crisis regulation despite not contributing to the financial crisis and said “one-size-fits-all” supervision imposes unnecessary costs on smaller and less complex firms. He pointed to the 2018 Economic Growth, Regulatory Relief, and Consumer Protection Act (S. 2155) as an effort to recalibrate regulation toward a more tailored, risk-based approach, and criticised what he described as a shift away from tailoring in recent years, including the interagency Basel III “Endgame” proposal, which he noted was not finalised following negative comment letters and legislative pushback. The remarks also raised concerns about supervisory inconsistency, novel legal interpretations without a meaningful appeals process, and the use of the CAMELS framework’s “management” component in ways that can hinder otherwise compliant institutions; the hearing was positioned to examine directing examiners to use objective, risk-based metrics. Barr described the session as the first of multiple hearings and referenced several bills associated with the hearing that would advance regulatory tailoring and reinforce Congress’ Article I authority, including in relation to regulators’ engagement with global governance groups such as the Network for Greening the Financial System.