Tailored banking regulation by risk

Summary#

This bill requires federal banking regulators to consider an institution’s risk profile and business model when writing rules. It tells agencies to tailor rules so they impose less cost and burden where risk is lower, and to explain how they did that in each rulemaking. The bill also asks for a review of recent regulations, shorter periodic reports for many community banks, and a report on modernizing bank supervision.

• Main change: Agencies must take risk and business model into account and limit regulatory impact appropriately.
• Rulemaking transparency: Agencies must explain in notices how they applied tailoring and report annually to Congress on their actions.
• Look-back review: Agencies must review regulations issued in the roughly prior 7 years and revise them under the tailoring requirement within 3 years if needed.
• Community bank reporting: Banks eligible for the Community Bank Leverage Ratio would get a reduced (short-form) condition report for the first and third reports each year.
• Supervision modernization: Agencies must produce a report, in consultation with state supervisors, on updating bank supervision (examiner training, tech use, community bank issues, etc.).

What it means for you#

• Community banks and small banks

  • May see less frequent or shorter reporting paperwork for two of the annual condition reports each year.
  • Could face rules that are written or revised to be less burdensome if the bank’s business model and risk are low.

• Regional and large banks

  • The bill requires agencies to consider their specific risk profiles too, but it does not promise reduced rules for higher-risk institutions.
  • Larger banks may be affected if agencies change rules that were written broadly for all banks.

• Credit unions

  • The tailoring requirement applies to the agencies that supervise credit unions, so similar consideration of business models and risk could affect them.

• Customers and local communities

  • This could mean banks that serve local markets have fewer compliance costs and more flexibility — if agencies tailor rules as the bill directs.
  • It could also change what data supervisors collect about banks (because of shorter reports for some banks).

• Federal and state supervisors

  • Federal agencies must add documentation to rulemaking files, do an extensive review of recent regulations, and produce an annual tailoring report to Congress.
  • State supervisors will be consulted for the modernization report.

• Third-party service providers

  • The bill asks agencies to consider how third-party vendors’ actions might affect tailoring, but it does not change vendors’ legal duties. This may influence how agencies treat vendor-related risks.

Expenses#

No publicly available information.

• The bill will require agencies to prepare annual reports to Congress and to review and possibly revise many recent regulations, which could raise administrative and staff costs.
• Agencies will have to add explanations to every proposed and final rule; that increases documentation and legal work.
• Shorter call reports for eligible community banks could reduce compliance costs for those banks (exact savings not estimated here).
• The required modernization report may involve consultation and analysis with state supervisors and could create additional administrative costs.
• There is no Congressional budget or fiscal estimate included here to quantify these effects.

Proponents' View#

• The bill appears intended to reduce unnecessary regulatory burden on lower‑risk institutions by having agencies tailor rules to risk and business model.
• The tailoring requirement could make rules more efficient and better targeted, so banks can serve customers and local markets more flexibly.
• Requiring agencies to explain their tailoring decisions increases transparency in rulemaking.
• The short-form call reports aim to lower paperwork and compliance cost for community banks eligible under the Community Bank Leverage Ratio.
• The modernization report is intended to update supervision practices (training, technology, and structures) to match changing bank business models.

Opponents' View#

• One concern is that requiring tailoring could lead agencies to weaken protections or apply inconsistent rules across institutions, depending on how “risk” and “business model” are interpreted.
• The bill leaves important details vague—such as how to measure risk or when a different rule is justified—so implementation could be uneven.
• Revising many rules from the past 7 years may impose a heavy workload on agencies and could delay other supervisory work.
• Shorter call reports mean supervisors get less information twice a year from eligible banks, which could affect oversight quality unless other data fill the gap.
• There may be legal uncertainty if tailoring leads agencies to adopt approaches that could conflict with the statutes that require particular standards; the bill requires agencies to consider statutory intent but does not resolve conflicts.