East Idaho Times

U.S. Senators Mike Crapo (R-Idaho) and Thom Tillis (R-North Carolina), along with Republican colleagues from the Senate Banking Committee, have urged Federal Deposit Insurance Corporation (FDIC) Chairman Martin Gruenberg to withdraw the agency's new corporate governance and risk management guidelines. They argue that these guidelines could negatively impact 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,” stated the Senators in their letter.

The Senators emphasized that "safety and soundness is the cornerstone regulatory principle of the U.S. banking system." They noted that ineffective risk management by financial institutions, combined with inadequate supervision by regulators, contributed to banking failures in 2023. The failure of Silicon Valley Bank (SVB) was highlighted as a case where poor management strategies were met with insufficient regulatory responses.

“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," they continued. The Senators expressed concerns about undue burdens on banks operating in small and rural communities, lack of consensus among FDIC leadership, misalignment with other regulators, and opposition from state supervisors.

In addition to Crapo and Tillis, the letter was signed by Senators Tim Scott (R-South Carolina), Mike Rounds (R-South Dakota), John Kennedy (R-Louisiana), Bill Hagerty (R-Tennessee), Cynthia Lummis (R-Wyoming), JD Vance (R-Ohio), Katie Britt (R-Alabama), Kevin Cramer (R-North Dakota) and Steve Daines (R-Montana).

The FDIC Corporate Governance Proposal includes several contentious points:

- Imposes numerous requirements on bank Boards of Directors.

- Requires Boards to ensure bank safety, effective risk governance, and legal compliance.

- Mandates unrealistic Board composition standards for smaller institutions.

- Micro-manages bank activities.

- Contradicts state corporate governance laws.

- Faces opposition from stakeholders such as the Conference of State Bank Supervisors.

An analysis during the Proposal’s Notice and Comment period revealed substantial opposition or concerns from 92% of posted comments.