The council cited several examples of the regulatory challenges banks face, including the complex Basel III capital rules, the recent TILA-RESPA integrated disclosure requirements and Qualified Mortgage rules, and also noted several areas that are likely to face greater regulatory scrutiny in the future, such as small business lending and mortgage servicing.
While the council acknowledged that many institutions have adapted to the new rules and regulations, members cautioned that shadow banks and the largely unregulated fintech sector could pose a serious competitive threat in the future. In addition, the council pointed out that consumers also face a greater risk when using financial services offered by nonbank providers.
The council said:
Financial institutions are subject to extensive consumer protection regulations, capital requirements and stringent rules regarding consumer privacy and data security. Nonfinancial institutions offering payment services do not provide the same level of consumer protection or systemic strength.
The CDIAC advises the Fed on the economy, lending conditions and other issues. Members are selected from representatives of commercial banks, thrift institutions and credit unions serving on local advisory councils at the 12 Federal Reserve Banks. One member from each of those councils serves on the CDIAC, which meets twice a year with the Fed board in Washington.
Read the meeting minutes.