State Bankers Association Letter to the Fed on Collaborative Rulemaking

Dear Chair Powell:

We, the undersigned state bankers' associations, write to express our appreciation for the dedication to collaborative decision-making that you have consistently demonstrated throughout your tenure. Your emphasis on building consensus and seeking the "broad support" of the Board in rulemakings is crucial to maintaining the stability and effectiveness of bank regulation. It underscores the importance of diverse perspectives in shaping regulatory policies. Your commitment to inclusivity is vital, particularly as the financial and regulatory landscape continues to evolve and we face new challenges.

As you know, considering a diverse range of perspectives and views from fellow Board members is essential to creating a balanced regulatory framework. Failure to consider views from all Board members may result in a regulatory pendulum effect, where rules change rapidly with changes in leadership and political winds. For instance, if regulations are formulated without thorough consultation with the full Board, there is a risk of overlooking unintended consequences to regulated entities and to the broader economy. This oversight can lead to regulatory imbalances, creating an environment where subsequent administrations feel compelled to swing the pendulum back and forth in an attempt to "correct" for previous rulemakings, implementing drastic changes in response to emerging issues and leading to greater instability.

We firmly believe that rulemakings must have broad support of the Board to make durable rules that endure the inevitable political swings. Without broad support, the regulatory pendulum could become its own destabilizing risk to the banking system.

Statutory authority gives the Vice Chair of Supervision powers to develop and recommend regulatory proposals to the Board. While this power is broad, there is significant discretion in how it has been implemented. It is self-evident that the Vice Chair of Supervision should actively seek out views of his fellow Board members and make changes to rulemakings to accommodate their concerns in order to avoid the regulatory pendulum. At the same time, the responsibility of ensuring a clear, collaborative and consistent governance process clearly lies with the Chair.

Particularly important is consultation with the Subcommittee on Smaller Regional and Community Banking, the body established by the Federal Reserve to provide leadership and oversight on matters related specifically to those institutions.

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