FR 2020-28452

General Summary of the Document

The Federal Deposit Insurance Corporation (FDIC) has issued a final rule to streamline its regulations concerning nondiscrimination in banking. Specifically, the FDIC is rescinding its regulation titled "Nondiscrimination Requirements" and updating its "Fair Housing" regulation to apply to State savings associations as well. This action ensures that all FDIC-supervised banks are aligned under the same nondiscrimination standards, aiming for coherence with key federal laws like the Equal Credit Opportunity Act and Fair Housing Act. The rule is set to take effect on March 5, 2021, with additional compliance requirements due by February 3, 2022.

Significant Issues or Concerns

The document's complexity and extensive legal jargon pose significant challenges for laypersons attempting to comprehend the full scope and implications of these regulatory changes. The frequent references to specific sections, acts, and amendments suggest a need for an authoritative understanding or cross-referencing with other legal documents—a daunting task for the average reader. Moreover, while the document mentions the regulations' simplification, it lacks detailed oversight or accountability measures to enforce compliance, which could be a concern for stakeholders.

Impact on the Public Broadly

The rescission of duplicative and outdated regulations can potentially benefit the general public by promoting clearer and more uniform nondiscrimination policies across all FDIC-supervised financial institutions. This simplification can lead to better enforcement of nondiscrimination, essential to protecting consumer rights within the banking sector. The general public will likely experience banking services that are more consistent and equitable, which builds trust in financial institutions.

Impact on Specific Stakeholders

For the financial industry, particularly State savings associations, the updated regulations might reduce administrative and compliance burdens by eliminating overlapping and unnecessary rules. This change can enhance operational efficiency and foster a more competitive environment in the banking sector. However, transitioning to these updated regulations might require initial adjustments and potential retraining for bank staff to ensure all are in compliance with the new rules.

Consumer rights advocates might perceive these regulatory changes positively, as they promise enhanced adherence to fair lending practices. Nonetheless, advocates might express concern over the lack of explicitly stated oversight mechanisms, which are crucial for effectively monitoring and enforcing nondiscrimination across institutions.

In conclusion, while the rule promises simpler, more streamlined nondiscrimination regulations advantageous to various stakeholders, its implementation and effects will hinge on the robustness of enforcement mechanisms within the FDIC and the responsiveness of institutions to adopt these changes effectively.

The document includes several references to financial thresholds and definitions that are important for understanding its regulatory impact, particularly on smaller institutions.

Small Business Definition and Impact

The Small Business Administration (SBA) defines "small entities" in the banking sector as organizations with total assets of less than or equal to $600 million. This definition is crucial as it sets the standard for determining which institutions are considered small under the regulations. The FDIC uses this classification to assess the economic impact of its regulations, ensuring that policies do not disproportionately affect smaller banks. The FDIC considers a significant financial effect to exceed 5 percent of annual salaries and benefits per institution or 2.5 percent of total noninterest expenses. This metric helps gauge whether the new regulations place an undue burden on small entities.

Regulatory Impact and Major Rule Definition

The Office of Management and Budget (OMB) plays a role in assessing whether a rule can be considered a "major rule" under the Congressional Review Act (CRA). A major rule is one that results in a financial impact of $100 million or more annually on the economy, among other substantial effects. This document indicates that the OMB has determined the rule in question is not a "major rule," implying that it does not meet the $100 million financial threshold or cause significant cost increases across various sectors. This determination is important as it influences timelines and expectations for rule implementation.

Economic Thresholds and Considerations

The CRA's definition of a major rule involves several key financial thresholds that determine how regulatory changes might affect the economy. Criteria such as causing major increases in costs for consumers, industries, or government entities—if exceeding certain thresholds—can classify the rule as major, triggering additional review and delay processes.

In summary, the financial references in the document clarify how regulations relate to small banking entities and outline criteria for determining whether a rule is economically significant. These considerations are essential for ensuring that regulatory changes are balanced and that small entities are not disproportionately impacted. Such financial benchmarks also determine the broader economic implications and compliance expectations associated with new regulations.