Over the Line: Asset Thresholds in Bank Regulation

"As of December 31, 2020, there were over 5,000 banks in the United States. While certain kinds of banks may be similar to each other, the industry as a whole is made of up institutions that differ in a variety of ways, in some ways quite drastically. How concentrated a bank is in loan making, how concentrated that lending is in specific loan types or geographic markets, how many other financial services the bank provides, and how much risk it is willing to take on are just a few characteristics across which banks may differ significantly. Perhaps the most striking disparity across the industry is bank size, typically measured as the value of the assets a bank owns.

Nearly a fifth of banks hold less than $100 million in assets, and the industry median is about $300 million. Meanwhile, the largest U.S. bank has over $3 trillion in assets, with three others over or near $2 trillion. Relative to large banks, small banks also tend to focus more on traditional commercial bank activities such as loan making and deposit taking; be less or not at all involved in other activities such as securities dealing and derivatives; have fewer resources to dedicate to regulatory compliance; and individually pose less or no risk to the stability of the financial system. For these reasons, there is general consensus that bank regulations should be tailored to account for bank differences, although questions over how much regulation should be tightened or relaxed for different groups of banks and to exactly which banks the changes should apply are matters of perennial debate.

Tailoring bank regulation in general produces certain benefits (e.g., achieving the goals of a regulation at less cost; not subjecting a group of banks to needless, costly regulation; freeing small bank resources for lending) but at certain costs (e.g., potential increased risk of failure for banks that qualify for relatively lax regulation, creating the opportunity for regulatory arbitrage). Furthermore, the reliance on asset thresholds has strengths and weaknesses. As a simple criterion, it makes regulatory treatment objective and transparent and minimizes opportunity for regulatory arbitrage. However, when application of a rule relies on a single, binary criterion, it can create distortionary “cliff” effects..."
Bank regulations 

Banking Policy Issues in the 117th Congress

"Over the past 14 years, banking has experienced significant events and changes and has regularly been the subject of policymaker initiatives and debates. In response to the 2007-2009 financial crisis, Congress—primarily through the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act; P.L. 111-203)—and bank regulators, using new and existing authorities, increased bank regulation. While some observers view those changes as necessary and effective, others argued that certain regulations were unjustifiably burdensome. To address those concerns, the 2018 Economic Growth, Regulatory Relief, and Consumer Protection Act (P.L. 115-174) relaxed certain regulations. Opponents of that legislation argue that it unnecessarily pared back important safeguards, while proponents of deregulation argue that additional measures are needed. More recently, the Coronavirus Disease 2019 (COVID-19) pandemic has created unprecedented economic conditions that could stress the banking industry. As a result, the 117th Congress faces many issues related to banking, including:
 

 Safety and soundness.

Banks are subject to prudential regulations designed to reduce the likelihood of bank failures, and banks face certain rules about how they should value their assets and account for losses. In addition, anti-money-laundering requirements aim to block transactions involving criminal proceeds. Banks are also required to take steps to avoid cyberattacks. The extent to which these regulations are effective and appropriately balance benefits and costs is a matter of debate.

 Consumer fairness and access.

Certain laws are designed to protect consumers and ensure that lenders use fair lending practices. Generally, policymakers balance consumer protection, credit access, and industry costs when considering consumer protection laws and regulation and encourage access to banking services for disadvantaged consumers. In addition, one bank regulator has revised its Community Reinvestment Act (CRA, P.L. 95-182) regulatory framework while the other two regulators have not, raising concern that the CRA could be implemented inconsistently.

 COVID-19 effects and policy responses.

The COVID-19 pandemic has impaired the ability of millions of businesses and individuals to make repayments on their bank loans. Furthermore, the Coronavirus Aid, Relief, and Economic Security (CARES) Act (P.L. 116-136) will have direct or indirect effects on banks. Congress may examine questions related to stress in the banking industry, the expiration of loan forbearances and of bank regulatory relief granted pursuant to the CARES Act, and the regulatory implications of bank asset growth caused by the pandemic and policy responses to it.

 Community banks.

The number of small or “community” banks has declined substantially in recent decades. No consensus exists on the degree to which the removal of regulatory barriers to interstate branching and banking, market forces, and regulatory burden are causing the decline. Because these institutions are considered important sources of credit, Congress may consider policies to support them. ..."
Banking 

Banking Policy Issues in the 115 th Congress

"The financial crisis and the ensuing legislative and regulatory responses greatly affected the banking industry. Many new regulations—mandated or authorized by the Dodd-Frank Wall Street Reform and Consumer Protection Act (P.L. 111-203) or promulgated under the authority of bank regulators—have been implemented in recent years. In addition, economic and technological trends continue to affect banks. As a result, Congress is faced with many issues related to the bank industry, including issues concerning prudential regulation, consumer protection, “too big to fail” (TBTF) banks, community banks, regulatory agency design and independence, and market and economic trends. For example, the Financial CHOICE Act (H.R. 10) and the Economic Growth, Regulatory Relief, and Consumer Protection Act (S. 2155) propose wide ranging changes to the financial regulatory system, and include provisions related to many of these banking issues..."

Banking policy

Banking Organization Systemic Risk Report

"The Federal Reserve Board today announced the availability of data that can be used to evaluate the individual systemic footprint of 33 large U.S. bank holding companies.  The data will help to ensure comparability when evaluating the systemic risk profile of each banking organization.

The data cover five categories often used when considering the potential systemic risk of a banking organization: size; interconnectedness; complexity; substitutability, which is a measure of how easily a firm's activities can be replaced by another firm; and cross-jurisdictional activity, which includes foreign liabilities and claims..."

Banks, banking

Federal Reserve Bulletin

For research data on banks and banking, take a look at the Federal Reserve Bulletin. This site provides full-text of the monthly issues of the bulletin from 1996 to the present.
Federal Reserve Bulletin

The Effects of the Great Recession on Central Bank Doctrine and Practice

"The financial crisis of 2008 and 2009, together with the associated deep recession, was a historic event--historic in the sense that its severity and economic consequences were enormous, but also in the sense that, as the papers at this conference document, the crisis seems certain to have profound and long-lasting effects on our economy, our society, and our politics. More subtle, but of possibly great importance in the long run, will be the effects of the crisis on intellectual frameworks, including the ways in which economists analyze macroeconomic and financial phenomena..."

Shop and Save…at the Bank:A Buyer's Guide to Finding the Right Loan, Credit Card or Deposit Account
Consumer information on finding a bank from the Federal Deposit Insurance Corporation.

Bank Crime Statistics, 2nd Quarter 2010
"During the second quarter of 2010, there were 1,146 reported violations of the Federal Bank Robbery and Incidental Crimes Statute, a decrease from the 1,304 reported violations in the same quarter of 2009.1 According to statistics released today by the FBI, there were 1,135 robberies, 11 burglaries, zero larcenies, and one extortion of financial institutions2 reported between April 1, 2010 and June 31, 2010.

Highlights of the report include:

Loot was taken in 91 percent of the incidents, totaling more than $8.4 million.
Of the loot taken, 21 percent of it was recovered. More than $1.3 million was recovered and returned to financial institutions.
Bank crimes most frequently occurred on Friday. Regardless of the day, the time frame when bank crimes occurred most frequently was between 9:00 a.m. and 11:00 a.m.
Acts of violence were committed in 5 percent of the incidents, resulting in 23 injuries, five deaths, and nine persons being taken hostage.3
Oral demands and demand notes 4 were the most common modus operandi used.
Most violations occurred in the Western region of the U.S., with 403 reported incidents..."

Overdraft Rules for Debit and ATM Cards
"Bank account overdraft fees can be a source of unexpected costs for consumers. A new online Federal Reserve Board publication will help consumers better understand rules that provide additional protection when a debit card or automated teller machine (ATM) transaction causes an account to be overdrawn.

Federal Reserve Board rules that take effect on July 1, 2010, prohibit financial institutions from charging overdraft fees for ATM and one-time debit card transactions unless a consumer consents, or opts in, to the overdraft service for those types of transactions. What You Need to Know: New Overdraft Rules for Debit and ATM Cards provides an explanation of how the rules will affect existing and new account holders. It contains basic information about types and typical costs of overdraft services and defines common terms consumers may encounter in communications from their bank about overdrafts.

Under the Board's rules, financial institutions must provide consumers a notice that explains the financial institution's overdraft services, including the fees associated with the service, and the consumer's choices. Institutions will soon begin providing these notices, and this publication will help consumers understand how to use the information to make the best choices regarding overdraft services..."

FDIC National Survey of Unbanked and Underbanked Households
"In January 2009, the Federal Deposit Insurance Corporation (FDIC) sponsored a special supplement to the U.S. Census Bureau’s Current Population Survey (CPS) to collect national, state, and metropolitan statistical area (MSA) data on the number of U.S. households that are unbanked and underbanked, their demographic characteristics, and their reasons for being unbanked and under-
banked...

• An estimated 7.7 percent of U.S. households, approximately 9 million, are unbanked. At least 17 million adults reside in these unbanked households...

• The proportion of U.S. households that are unbanked varies considerably among different racial
and ethnic groups, with certain racial and ethnic minorities more likely to be unbanked than the
population as a whole. Minorities more likely to be unbanked include blacks (an estimated 21.7 percent of black households are unbanked), Hispanics (19.3 percent), and American Indian/Alaskans (15.6 percent). Racial groups less likely to be unbanked are Asians (3.5 percent) and whites (3.3 percent)..."

FBI Releases 2008 Bank Crime Statistics
"Today the FBI released bank crime statistics for calendar year 2008. Between January 1, 2008 and December 31, 2008, there were 6,700 robberies of financial institutions*, as well as 121 burglaries and 28 larcenies reported. This represents 6,849 reported violations of the Federal Bank Robbery and Incidental Crimes Statute.

“While the statistics released today show a slight decrease from the 6,933 reported violations in 2007, we recognize that these crimes take a serious financial toll on the community,” said Assistant Director Kevin Perkins, FBI Criminal Investigative Division. "The FBI remains committed to working with local authorities and bank officials to catch bank bandits and prevent bank crimes from occurring.""
View full report.

A Borrower's Guide to an FDIC Insured Bank Failure
"Information on

1. About the FDIC
2. What is a Bank Failure?
3. Overview of the FDIC’s Asset Disposition Process
4. Communication with Borrowers during Interim Servicing
5. What to do if You Experience Financial Difficulties
6. Lines of Credit and Construction and Development Loans
7. Borrower Requests for Additional Funding
8. Potential Outcomes to Funding Requests
9. What to Expect if the FDIC Sells Your Loan
10. Contacting the FDIC
11. Additional Borrower Assistance"

FBI Releases Bank Crime Statistics for Third Quarter of 2008
"Today the FBI released bank crime statistics for the third quarter of calendar year 2008. Between July 1, 2008 and September 30, 2008, there were 1,358 robberies of financial institutions¹, as well as 14 burglaries and four larcenies. This represents 1,376 reported violations of the Federal Bank Robbery and Incidental Crimes Statute, a decrease from the second quarter’s total of 1,443 and first quarter’s total of 1,641."

Insured Banks and Thrifts Earned $1.7 Billion in the Third Quarter
"Commercial banks and savings institutions insured by the Federal Deposit Insurance Corporation (FDIC) reported net income of $1.7 billion in the third quarter of 2008, a decline of $27.0 billion (94 percent) from the $28.7 billion that the industry earned in the third quarter of 2007. With the exception of the fourth quarter of last year, the latest earnings were the lowest for the industry since the fourth quarter of 1990."

Dynamic Maps of Bank Card and Mortgage Delinquencies in the United States
Find institutions with bank card deliquency rates of 60+ days and mortgage deliquency rates of 90+ days.

Consumers Warned to Avoid Fake E-mails Tied to Bank Mergers
"The Federal Trade Commission urges caution regarding e-mails that look as if they come from a financial institution that recently acquired a consumer’s bank, savings and loan, or mortgage. In fact, these messages may be from “phishers” looking to use personal information – account numbers, passwords, Social Security numbers – to run up bills or commit other crimes in a consumer’s name.

Consumers are warned not to take the bait. The FTC has advice about how to stay on guard against this type of scam. To learn more, see the consumer alert “Bank Failures, Mergers and Takeovers: A ‘Phish-erman’s Special,’” at http://www.ftc.gov/bcp/edu/pubs/consumer/alerts/alt089.shtm..."

FDIC Issues List of Banks Examined for CRA Compliance
"The Federal Deposit Insurance Corporation (FDIC) today issued its list of state nonmember banks recently evaluated for compliance with the Community Reinvestment Act (CRA). The list covers evaluation ratings that the FDIC assigned to institutions in May 2008. The CRA is a 1977 law intended to encourage insured banks and thrifts to meet local credit needs, including those of low- and moderate-income neighborhoods, consistent with safe and sound operations. As part of the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (FIRREA), Congress mandated the public disclosure of an evaluation and rating for each bank or thrift that undergoes a CRA examination on or after July 1, 1990."

FDIC Statistics at a Glance: Historical Trends As of March 31, 2008
Federal Deposit Insurance Corportion historical statistics, 1990- March 31, 2008.

FDIC State Profiles
Quarterly statistical information by states from the Federal Deposit Insurance Corporation.