FR 2021-01524

Summary of the Document

The document issued by the Bureau of Consumer Financial Protection adopts a final rule concerning supervisory guidance within the financial sector. Supervisory guidance serves as an advisory tool, offering insights into how the Bureau expects regulated institutions, such as banks, to operate. However, it is crucial to understand that this guidance does not carry the same weight as laws or regulations and, thus, does not create enforceable legal obligations. The rule is grounded in the 2018 Interagency Statement and aims to clearly delineate the role of supervisory guidance, confirming that the Bureau will not take enforcement actions based on such guidance alone.

Significant Issues or Concerns

The document raises several issues and concerns. Firstly, the language used is quite technical and contains legal jargon, which may not be easily understood by the general public. This complexity can lead to ambiguity and possible misinterpretation of its implications. Secondly, while the text suggests that increased clarity in supervisory guidance will reduce compliance costs for institutions, it lacks empirical data to substantiate these claims. Additionally, the document appears to lean towards addressing industry stakeholders' calls for reduced supervisory interventions, potentially overshadowing the concerns about consumer protection.

Moreover, the feedback from public interest groups suggests that while their concerns are acknowledged, the document does not offer substantial modifications in response to these concerns. Hence, some stakeholders may view this as a reluctance to alter the rule based on public input.

Impact on the Public

Broadly speaking, the public could benefit from the rule's implications through potentially enhanced clarity and understanding of how supervisory guidance is applied in the financial sector. This clarity might indirectly lead to benefits such as reduced compliance costs for financial institutions, which in turn could be passed on to consumers in the form of better financial product offerings.

However, there are also potential negative outcomes. Without imposing binding legal obligations, the document's emphasis on guidance over regulation may weaken consumer protection and leave room for inconsistent supervisory practices that do not adequately address consumer interests.

Impact on Specific Stakeholders

For financial institutions, especially those under the Bureau's supervision, the document is promising as it offers greater certainty and potentially lowers compliance costs. Institutions can proceed knowing that they are not legally obligated to follow supervisory guidance in itself, while also having advisory insights into best practices. Industry stakeholders generally support this clarity as it outlines more predictable operating conditions.

On the other hand, some consumer advocacy groups express concern that this rule may reduce the effective supervisory scrutiny of financial institutions. They worry that, without stronger enforceability, the financial sector might prioritize flexibility and discretion over consumer safety and soundness, potentially leading to adverse outcomes for consumers.

In conclusion, while the document establishes important boundaries and provides clarity for financial institutions, it also elicits mixed feelings about its efficacy in balancing supervisory guidance with consumer protections, warranting further discussion and scrutiny by all stakeholders involved.

The document outlines a final rule adopted by the Bureau of Consumer Financial Protection to solidify the role of supervisory guidance. While the primary emphasis of the document is on legal and procedural aspects, it does include references to the financial implications for various institutions under supervision by the Bureau. These financial references, although not direct monetary figures, are important for understanding the rule's potential economic impact.

Financial Implications for Institutions

The rule may impact several institutions based on their asset size. Nondepository institutions supervised under section 1024 of the Dodd-Frank Act and insured depository institutions and insured credit unions with more than $10 billion in total assets, along with their affiliates, fall under the Bureau's supervisory authority as outlined in section 1025 of the Dodd-Frank Act. These references indicate that the rule primarily targets larger institutions, potentially altering compliance and operational costs due to its binding nature.

For smaller institutions, specifically depository institutions and credit unions with no more than $10 billion in total assets, the Bureau has limited supervisory authority as per section 1026 of the Dodd-Frank Act. Consequently, these smaller institutions are generally not addressed in the supervisory guidance, which might relieve them from potential compliance costs associated with adhering to the new supervisory rules.

Impact on Compliance Costs

The document suggests that the rule's clarification regarding supervisory guidance aims to provide relevant institutions with greater certainty about their legal obligations. This increased clarity could potentially reduce compliance costs, as institutions might avoid unnecessary expenses arising from misunderstandings or misapplications of supervisory guidance. However, these financial benefits are described in speculative terms, with no empirical data provided to substantiate the claim that reduced compliance costs will directly result in consumer benefits.

Considerations for Financial Impact Evaluation

Under section 1022(b)(2)(A) of the Dodd-Frank Act, the Bureau is tasked with considering various impacts of the regulation, including on consumer access to financial products and services, particularly for those institutions with no more than $10 billion in total assets. This requirement highlights the potential economic ramifications that the rule could have on smaller entities and their consumers, though such impacts are not deeply explored in the document.

Addressing Stakeholder Concerns

Public interest groups expressed concerns that the lack of robust supervisory guidance could lead to practices that negatively affect consumers, especially if banks operate without stringent oversight. Despite acknowledging these concerns, the rule emphasizes a commitment to reducing unnecessary regulatory burdens on institutions, which some may perceive as a tilt towards industry interests rather than consumer protection.

In summary, while direct financial allocations or appropriations are not explicitly detailed, the references to institutional asset thresholds and potential compliance cost savings underline significant economic considerations associated with the implementation of this rule. The document invites interpretations about how these financial changes might indirectly impact consumer costs and access to financial services, though such interpretations remain speculative and unquantified.