Hearing of U.S. Senate Committee on Banking, Housing, and Urban Affairs "Executive Session "Financial Services Regulatory Relief Act of 2006"

Hearing of U.S. Senate Committee on Banking, Housing, and Urban Affairs "Executive Session "Financial Services Regulatory Relief Act of 2006"

Statement of Mike Crapo

I want to thank my fellow committee members for working with me to craft a regulatory relief package that reflects broad bi-partisan agreement among our Committee. This legislation contains significant provisions that were developed by a number of my colleagues, and I would like to thank them for their contributions. I am especially appreciative to Chairman Shelby, Ranking Member Sarbanes, and their staffs for all their diligence and hard work.

The Senate Banking Committee has held three hearings with numerous witnesses to help our efforts to move from the general objective of creating reform to specific proposals that achieve this result. As this process demonstrates, it is important for Congress to periodically review the laws applicable to the financial services industry to ensure that compliance and red tape does not impose an unreasonable and unnecessary burden on the economy and truly achieves its intended goals. I appreciate the considerable amount of input and work of so many involved, especially OTS Director Reich for his dedication and perseverance in leading this effort.

After many months of negotiations and discussion with regulators, industry, consumer groups, and other interested parties, we now have a bill before us that will provide important regulatory relief for financial institutions. This legislation is a compromise for all sides and doesn't let the "perfect" stand in the way of what is possible. There are issues on both sides of the aisle that Members have foregone in an effort to support our desire to get a bill signed into law this year. It is my hope that we will be able to continue in this bi-partisan manner on the floor and avoid amendments that will delay passage.

I would like to briefly highlight a few issues.

Community Banks: First, it would direct federal banking agencies to review the call report every five years to delete items that are no longer relevant. Second, it would increase asset-size eligibility for an 18-month exam cycle for well-rated, well-capitalized banks from $250 million to $500 million. Third, it would increase the exemption from the management interlocks restriction from $20 million in assets to $50 million. Fourth, it would remove the duplicative oversight and disparate treatment of savings associations under the federal securities laws by providing the same exemptions available to banks with respect to investment advisers and broker-dealer activities.

Credit Unions: First, it would allow credit unions to negotiate for nominal land rents on military installations. Second, it would update the current 12­-year maturity loan limit for credit unions to 15 years, which is more commonly accepted in the market today. Third it would allow credit unions to help bring the unbanked into our financial system by providing basic check cashing and wire transfer services to anyone in their field of membership. Fourth, it would update the definition of net worth for credit unions so merging credit unions would not suffer unintended consequences with any pending accounting rule change.

Reg B relief: This section directs the SEC to consult with, and seek, the concurrence of the federal banking agencies in implementing rules under Section 201 of the Gramm-Leach-Bliley Act. In addition, this section specifies that such rulemaking shall supersede any existing proposed or interim final rules issued by the SEC. Reg B has sparked broad opposition from Members of Congress, the federal banking agencies, and the banking industry. Reg B, if implemented in its current form, would lead to the very result that Congress sought explicitly to avoid: The establishment of a burdensome regulatory maze that would lead banks and thrifts to stop offering certain products and services to their customers. If the SEC fails to obtain concurrence with the banking regulators, then any banking regulator could bring judicial action against a proposed SEC rule in the DC Circuit, with no deference granted to either the SEC or the bank regulators.

Privacy forms: This section directs the regulatory agencies to finalize a proposal that makes privacy notices sent to consumers more readable and understandable.

Collateral modernization: This section would allow the Secretary of Treasury to determine the types of securities that may be pledged in lieu of surety bonds, and requires that the securities by valued at current market rates. These changes protect taxpayers' interests by allowing the Secretary of the Treasury to determine the types of securities that may be pledged in lieu of surety bonds, and requires that the securities be valued at current market rates. The improved regulatory flexibility will allow banks to offer their customers options to meet pledging requirements, reduce administrative costs and free up capital for more efficient uses such as lending, investments, or returning capital to shareholders.

It is my hope that we can vote this regulatory relief package out today with an overwhelming vote and move quickly to the floor. There is an immediate need and broad support for moving forward on comprehensive regulatory relief legislation.

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