WASHINGTON, D.C. — U.S. Sen. Sherrod Brown (D-OH) – ranking member of the U.S. Senate Committee on Banking, Housing, and Urban Affairs – attended today’s hearing entitled, “Examining the Regulatory Regime for Regional Banks.” Brown’s opening statement, as prepared for delivery, follows:



Opening Statement

Ranking Member Sherrod Brown

“Examining the Regulatory Regime for Regional Banks”

Senate Committee on Banking, Housing, and Urban Affairs

March 24, 2015


Thank you, Chairman Shelby, for calling this hearing to examine the regulation of regional banks, and thanks to our witnesses for being here today.

This is the second of two hearings on this topic. I thought that our discussion last Thursday was useful, and I hope that we can learn as much today.

It is important that we advance the conversation – to ensure that prudential regulations for regional banks are crafted appropriately.

This is a topic that is important to me because three large regional banks call Ohio home.

And as I said last week, we had a fourth that was unable to survive the 2008 financial crisis.

Congress, through the Dodd-Frank Act, directed agencies to institute standards like capital, liquidity, risk management, and stress testing to lower the likelihood and the costs of large bank holding company failures.

It called for heightened rules for large bank holding companies, but directed regulators not to take a one-size-fits all approach, so that a $50 billion bank would not be treated the same way as a $2 trillion bank.

We all agree that regional banks are not systemic in the same way that money center banks are.  The failure of one regional bank, assuming it is following a traditional model, will not threaten the entire system.  

But the rules were not meant to cover only “Systemically Important” or “Too Big to Fail” banks.

We heard from Governor Tarullo that systemic importance is about the failure of one institution creating a crisis, but it is also about the importance of an institution to homeowners and small businesses in the economic footprint where that bank operates.

Chairman Gruenberg told us that Indymac’s failure had consequences for its community, region, and the mortgage market as a whole.

I look forward to hearing more from today’s witnesses about these rules and their implementation for regional banks.

I continue to believe that we will not be successful this Congress in providing regulatory relief to institutions of any size if we do not have broad bipartisan consensus.

Our prospects are even less likely if we try to undermine or roll back central elements of Wall Street Reform.

The legislation that Senator Collins, Senator Johanns, and I sponsored to tailor insurance capital standards provides a useful model for how we should address these issues.

We started with the agencies – in that case, the Federal Reserve – to see if they could address the issue without legislation.

When that process faltered, we introduced legislation.

We then held hearings on that legislation, and considered input from supporters and skeptics alike.

The final product of a two-year process reflected a pragmatic compromise between industry and consumer groups that received the support of all 100 United States Senators.

And we did not allow other provisions to be added to our legislation.

I am open to solving real problems affecting actual institutions without undermining safety and soundness or consumer protection.

Last week we talked with the regulators about how the enhanced prudential standards are being applied to regional banks above $50 billion.  Today I hope we can answer other questions.

Are there specific standards that are inappropriate for regional banks and why?

Are the concerns being raised stem from implementing regulations, which require no legislation to fix, or from the law or itself?

Which concerns can be addressed by using the flexibility that the law provides the Federal Reserve, with prompting by the FSOC to lift the thresholds for some of these standards?

Regulation is necessary, and while it is our job to ensure that the regulations are appropriate, it is also important that we do not make it more difficult to monitor potential sources of risk or encourage unsafe practices.

Lending is an inherently risky business and enhanced prudential standards are important not just as a response to the last crisis, but also to prevent the next crisis.

Thank you, Mr. Chairman.