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January 5, 2021

Regulators Once Again Act in Interest of Banks, Not Consumers


Tuesday, January 5, 2021

Contact: Pamela Russell at 202-618-6433 or


Regulators Propose to Weaken Supervisory Guidance,

a Critical Tool Designed to Correct Unsafe Bank Behavior Before It’s Too Late


Washington, D.C.  –  Tim P. Clark, Distinguished Senior Banking Adviser for Better Markets, issued the following statement on the filing Monday of a comment letter with five regulatory agencies—the Federal Reserve, the OCC, the FDIC, the CFPB and the NCUA—on a joint rule proposal that threatens to weaken bank supervision:

“This proposal is yet another example of regulators acting for the benefit of the banking industry, not the protection of the broader American public. The proposal threatens to undermine the ability of the regulators and their supervisors to require banks to correct risky and abusive bank behavior before it ripens into full-blown problems that can destabilize banks or inflict widespread harm on consumers. The proposal could head us back in the direction of the pre-crisis era when light-touch supervision of the largest banks allowed them to operate using dangerously inadequate practices, contributing to the financial crisis and its devastating consequences.

“Supervisory guidance is a critical tool in bank regulation. It can inform the supervisory criticisms that regulators issue to get banks to identify and correct unsafe or potentially abusive practices in their early stages. The banks don’t like this because those criticisms can sometimes lead to ratings downgrades and possible limitations on their plans for expansionary activities until the practices are fixed. That’s why two prominent groups that advocate for the banking industry petitioned regulators for this rule scaling back the role of supervisory guidance.

“Fortunately, the agencies rejected the most extreme elements in the industry’s petition, but they granted much of it. And that includes a key provision that may weaken the role of guidance in informing and serving as the basis for supervisory criticism. The Proposal will also send a dangerous signal to banks that supervision in general will be more constrained and that banks could have more freedom to simply ignore supervisory guidance. This rule is unnecessary and unjustified. The agencies offered nothing to show how the rule would actually serve the broader public interest by protecting the safety and soundness of banks or preventing customer abuse.

“In our comment letter, we urged the agencies to withdraw the proposal or at least limit its scope and state plainly that guidance can and will continue to inform supervisory criticisms of banks. We argued that they should turn their attention instead to the more important task of implementing strong, enforceable rules with meaningful consequences for banks engaging in dangerous or abusive practices. Stronger rules are still necessary to better protect consumers, increase large banks’ resilience, and facilitate the orderly resolution of failing institutions.”


Better Markets is a non-profit, non-partisan, and independent organization founded in the wake of the 2008 financial crisis to promote the public interest in the financial markets, support the financial reform of Wall Street and make our financial system work for all Americans again. Better Markets works with allies – including many in finance – to promote pro-market, pro-business and pro-growth policies that help build a stronger, safer financial system that protects and promotes Americans’ jobs, savings, retirements and more. To learn more, visit

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