WASHINGTON—Federal Reserve Vice Chairman Randal Quarles, in testimony before the House Financial Services Committee, reviewed the regulatory and supervisory agenda of the Fed, including the steps the regulator has taken to reduce the burden on community financial institutions.
Quarles will present similar testimony today before the Senate Banking Committee.
House Financial Services Subcommittee Chairman Blaine Luetkemeyer (R-MO) noted during the hearing that lots of community banks and credit unions are going out of business because of the cost of compliance, adding that if rulemaking is causing these institutions to go out of business, then this is an area that deserves more attention. While Quarles didn't get a chance to respond, he did acknowledge throughout the hearing the high cost of compliance and burdensome regulations, NAFCU reported.
When discussing regulatory burden with Rep. Dennis Ross (R-FL) Quarles noted that lifting burdensome regulations would in fact provide for more growth in the economy as a whole and local communities. Ross was talking to Quarles about issues related to access to capital for small businesses, noting that such access is fundamental to vibrant growth. Ross referenced over-burdensome regulations from the past few years and how they have been an impediment to growth. Quarles agreed that lending to small businesses has been an issue for some time, and that certain regulations have obstructed growth, NAFCU said.
The increased risks to financial institutions from cyberattacks were also addressed during the hearing. House Financial Services Subcommittee Chairman Ann Wagner (R-MO) asked Quarles about these increased risks, noting that cyberattacks have increased dramatically over the past decade. Quarles responded with the need to focus on cyber risk and improve prevention tactics. Wagner also asked if the Fed was collaborating with other financial services regulatory agencies on the need to enhance cybersecurity standards. Quarles said the Financial Stability Oversight Council is working in conjunction with the Fed on this issue, and that additional agencies may play a role in the future.
Quarles also touched on fintech development and the opportunities these innovations bring to the financial services arena. He reiterated in his opening testimony that the Fed's supervision regarding fintech is "focused on ensuring that banks understand and manage these risks and that consumers remain protected."