Defining an approach to regulatory relief by complexity and activity, not strictly size, would provide a beneficial and prudent trade-off for firms protected by the safety net by acknowledging that banks that engage in traditional banking activities are sufficiently supervised and by appropriately bringing riskier activities under greater scrutiny.
For example, Hoenig’s regulatory relief ideas would apply to well-capitalized banks that hold no trading assets or liability, that hold no derivative positions apart from interest rate swaps and foreign exchange derivatives and that have a total notional value of derivatives exposures below $3 billion.
He recommended exemptions from all Basel capital standards and calculations, from certain Call Report schedules, from Dodd-Frank stress tests and from appraisal requirements. He also suggested eliminating requirements to refer possible or apparent fair lending violations to the Justice Department “if judged to be de minimis or inadvertent” and allowing an 18-month exam cycle.
Unlike Curry and Tarullo — both of whom have recommended that Congress should also exempt banks with less than $10 billion in assets from the Volcker Rule — Hoenig insisted that Volcker should remain intact, arguing that “the vast majority of community banks have virtually no compliance burden associated with implementing the Volcker Rule.”
Read the speech.