Operational Risk Capital Requirements for Banking Organizations

Floor Speech

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Mrs. BEATTY. Mr. Speaker, I thank our ranking member, Congresswoman Maxine Waters, for yielding me time and also for her steadfast leadership in opposing the Financial CHOICE Act and many of the provisions included in the bill, including the one that we are considering on the floor today.

Mr. Speaker, this bill flies in the face of the old maxim: Those who do not remember the past are condemned to repeat it.

This bill would effectively blindfold our regulators when calculating operational risk capital at our largest institutions--it is worth repeating again: not our community banks, but our largest financial institutions--by precluding them from looking at an institution's historic losses as an indicator of possible future losses.

Now, earlier, the ranking member injected an example of asking about our credit scores. I think it is worth elaborating on this, Mr. Speaker. Imagine if I go to a bank for a mortgage loan and they ask me for my credit score, and I simply told them they couldn't look at my past financial behavior in order to decide whether or not they are going to give me the loan.

So when you talk about good or commonsense regulation, we all know the answer to that question, Mr. Speaker.

Well, this bill would effectively do just that to our regulators. Instead of a credit score, which determines creditworthiness, operational risk determines the risk of loss resulting from inadequate or failed internal processes, people, and systems.

I would tell our regulators, when determining the appropriate level of capital a financial institution needs to hold against operational risk, you cannot look at an institution's past losses, especially if they got out of that business.

Mr. Speaker, I think this is common sense. I think whether you are a banker or a regulator, you clearly understand that we need to make sure that we don't blindfold our regulators.

So I oppose this bill, which would reduce capital in our country's largest financial institutions and blindfold our regulators' ability to safeguard the stability of our economy. I urge all of my colleagues to vote ``no.''

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Mrs. BEATTY. Mr. Speaker, I thank the ranking member for yielding me this time.

Maybe I should try to right that wrong analogy that our chairman thought; but maybe if I take his analogy that it is not based on the house I sold but it is based on the house I am living in, well, what is the difference?

If I went to the bank and wanted to put my house up for collateral but I hadn't paid the payment on it in 4 months and it was getting ready to be foreclosed on, I think they would want to know that. And that would be maybe a better analogy on it, because what we are trying to say to the people who are out there watching and listening to this: You cannot let our larger banks put us at risk, what we know also happened in 2008.

So that was the point I was making. So let's say the analogies don't work so we don't have to go back and forth. Let me just say that I am voting ``no'' on this because I don't want to blindfold or tie the hands of the regulators' being able to do their jobs.

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