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Tuesday, May 1, 2012

Enhanced Prudential Standards Tailored Approach Needed for Mid-Sized & Regional Banks

ABA in a comment letter yesterday expressed concern regarding how the Federal Reserve’s proposed rule implementing enhanced prudential standards and early remediation requirements under the Dodd-Frank Act’s Sections 165 and 166 would affect mid-sized and regional banks.

ABA emphasized that while it strongly supports risk management tools to identify and mitigate systemic risk, to be used effectively those tools should be tailored to an institution’s complexity, business model, geographic footprint and size.
A tailored approach to setting supervisory standards begins by defining baseline expectations for compliance with a particular regulation, clearly defining the goal to be achieved, and developing ... flexible or scalable techniques to apply those standards to a diverse industry.
ABA expressed concern that instead the proposal, as drafted, would be implemented in a one-size-fits-all manner which would treat all banks in broad asset-size categories the same way, or trickles down requirements to smaller institutions through the examination's staff's best-practices recommendations.

Read the full letter.

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