Ranking Member Tim Scott (R-S.C.) joined Senator Thom Tillis (R-N.C.) and his Republican colleagues on the Senate Banking Committee in a letter to Federal Deposit Insurance Corporation (FDIC) Chairman Martin Gruenberg, criticizing the agency's new corporate governance and risk management guidelines. The senators argue that these guidelines would harm the safety and soundness of the U.S. financial system.
"We write to you today regarding the Federal Deposit Insurance Corporation (FDIC)’s notice of proposed rulemaking and issuance of guidelines entitled ‘Guidelines Establishing Standards for Corporate Governance and Risk Management for Covered Institutions with Total Consolidated Assets of $10 Billion or More’ (the Proposal). Specifically, we are concerned that the rulemaking contains a multitude of issues and flaws that collectively will hinder, not improve, safety and soundness within the U.S. financial system," the senators wrote.
"Safety and soundness is the cornerstone regulatory principle of the U.S. banking system. To maintain this principle, financial institutions and financial regulators alike must operate under clear and well-defined regulatory frameworks. As the banking failures of 2023 showed, ineffective risk management by financial institutions paired with ineffective risk supervision by financial regulators are key areas from which potential hazards may arise. The failure of Silicon Valley Bank (SVB) in particular, where bank management’s perilous concentration and interest-rate strategies were met with sluggish and lackluster responses by financial regulators, underscores the necessity for regulatory constructs to emphasize clear and direct accountability standards for both bank management and regulators. Unfortunately, the Proposal, as drafted, indicates the FDIC is preparing to move in the opposite direction," they continued.
"While we agree that sound corporate governance is a necessity, the Proposal represents a significantly flawed approach to prudential regulation that seeks to micromanage Board affairs in a manner that will inject unnecessary uncertainty in key bank management activities. It will unduly burden banks that serve and operate in small and rural communities. And, perhaps most concerningly, the Proposal lacks consensus support among FDIC leadership, is out of step with other prudential regulators, and actively opposed by state supervisors. For these reasons, we respectfully request the FDIC withdraw the Proposal," they concluded.
In addition to Ranking Member Scott and Senator Tillis, Senators Mike Crapo (R-Idaho), Mike Rounds (R-S.D.), John Kennedy (R-La.), Bill Hagerty (R-Tenn.), Cynthia Lummis (R-Wyo.), J.D. Vance (R-Ohio), Katie Britt (R-Ala.), Kevin Cramer (R-N.D.), and Steve Daines (R-Mont.) signed onto this letter.