Global: FDIC Chair Advocates Comprehensive Review of Banking Regulations

Travis Hill, the newly appointed Acting Chair of the Federal Deposit Insurance Corporation (FDIC), has outlined an ambitious agenda to overhaul bank regulations. This initiative aims to foster economic growth and address challenges within the banking sector.

In a statement released Tuesday (Jan. 21), Hill emphasized the need for a “wholesale review of regulations, guidance, and manuals to ensure our rules and approach promote a vibrant, growing economy.” This review has been a top priority in Hill’s agenda since taking on the role.

Hill, who became Vice Chair of the FDIC in 2023, is also advocating for a more innovative and transparent approach to technology and fintech partnerships. This comes after the FDIC, under the Biden administration, increased scrutiny on collaborations between banks and fintech firms, citing concerns over compliance, fraud, and financial risk management.

The collapse of Synapse in April, which underscored vulnerabilities in Banking-as-a-Service (BaaS) partnerships, was highlighted in the FDIC’s recent rule proposal aimed at strengthening recordkeeping for third-party bank deposits.

Hill further called for the withdrawal of several contentious proposals from the past three years, including those concerning brokered deposits and corporate governance. He also stressed the importance of improving the FDIC’s readiness to manage the resolution of large financial institutions, drawing lessons from the costly failures of several regional banks in 2023.

Another key focus of Hill’s agenda is revising the bank merger approval process. He proposes replacing last year’s Statement of Policy to ensure merger transactions compliant with the Bank Merger Act are approved more efficiently.

These proposals come at a time when the financial sector anticipates a shift toward less stringent regulation. Mary Erdoes, head of asset and wealth management at J.P. Morgan Chase, expressed optimism about the potential regulatory changes at the World Economic Forum in Davos, noting the burden of excessive regulations introduced under the previous administration.

Erdoes stated, “The volume of new significant regulations introduced in the last administration was eight times that of the prior Trump administration. This resulted in millions of hours spent on compliance paperwork, which clogged the system and hindered economic growth. We’re looking forward to a healthier regulatory balance.”

Hill’s proactive approach signals a shift in priorities, aiming to balance regulation with economic vitality and innovation in the financial sector.