Senate Republicans ask FDIC to withdraw bank boards proposal

WASHINGTON — A group of Senate Banking Republicans have asked a bank regulator to withdraw its corporate governance and risk management guidelines

The lawmakers, led by Sen. Thom Tillis, R-N.C., and joined by vice presidential candidate Sen. J.D. Vance, R-Ohio, and Senate Banking Committee ranking member Sen. Tim Scott, R-S.C., said that the Federal Deposit Insurance Corp.’s proposal “represents a significantly flawed approach.” 

“It will unduly burden banks that serve and operate in small and rural communities,” the lawmakers said. “And, perhaps most concerningly, the proposal lacks consensus support among FDIC leadership, is out of step with other prudential regulators, and actively opposed by state supervisors.” 

The FDIC’s corporate governance guidance would require bank board directors to manage the risk profile of their financial institutions and would restrict directors from sitting on the boards of both a bank and its parent company.

The proposal has garnered pushback from the banking industry, as well as the Conference of State Bank Supervisors, which represents state banking agencies. 

“It is unclear whether the FDIC considered the numerous state laws or the decades of legal jurisprudence surrounding them that the proposal would undermine,” the Republicans led by Tillis said in the letter. 

The lawmakers also said that the FDIC would “blur the lines between the responsibilities of senior management and the responsibilities of the board.”

 “This will undoubtedly add unnecessary friction into bank management and erode the clear delineation of responsibilities for key management decisions,” they said. “Most concerningly, the insertion of the board into the risk management process will degrade the relationship between relevant risk management roles and operational accountability.” 

The letter represents growing consternation among congressional Republicans about the rule. Rep. Andy Barr, R-Ky., who chairs the House Financial Services Subcommittee on Financial Institutions and Monetary Policy, previously asked the FDIC to withdraw the proposal, citing similar complaints. 

The pushback to the FDIC’s proposal comes as the agency engages in a flurry of rulemaking. The agency’s chairman Martin Gruenberg is set to exit the agency once a replacement is confirmed amid concerns about his temperament and ability to clean up a toxic workplace culture. The White House has nominated Commodity Futures Trading Commission member Christy Goldsmith Romero to replace Gruenberg, but her odds of being confirmed ahead of the 2024 election are slim given the tight legislative calendar.