Many banks and representatives of banks have expressed concern about the burdens associated with post-crisis banking regulation and supervision. Banks do a public service when they raise these concerns.
These concerns, at a minimum, help bank supervisors and regulators understand the environment in which bankers operate. Such understanding can lead to more productive working relationships between bankers and supervisors. Typically, the concerns also help supervisors/regulators more accurately gauge the public costs and benefits of their actions. We need that information to maximize public benefits. Finally, supervisors try to be clear in setting expectations. We sometimes fail. Feedback from bankers tells us when we miss the mark.
Sometimes banker feedback leads to a change in policy and the operation of bank supervisors. Sometimes it does not. Bankers may view changes in policy or action as the only definition of success. But the public benefits of feedback noted above arise even if the precise changes bankers want do not occur.
Society loses if bankers do not come forward with their feedback. Unfortunately, a theme in recent banker feedback, particularly over the past several months, focuses on reluctance to provide feedback. The theme was highlighted in a congressional hearing held February 1 by the Financial Institutions and Consumer Credit Subcommittee of the House Committee on Financial Services. Leaders of several state bankers associations addressing the supervisory, regulatory and credit staffs at the Federal Reserve Bank of Minneapolis in February also raised concern that bankers were withholding feedback.
I, along with my colleagues in the Federal Reserve, take these concerns quite seriously given the public stakes involved. The source of banker reluctance requires immediate attention from the leaders of supervisory organizations. Bankers report that fear of retaliation drives at least some of the hesitancy to offer feedback.
The relationship between supervisor and bank lends itself to concerns of retaliation. Supervisors have important powers over banks, and banks and supervisors will have repeated contact over long periods of time. So I fully understand why concern of retaliation exists. Retaliation against a bank expressing concerns is not allowed or tolerated at the Federal Reserve Bank of Minneapolis or any other part of the Federal Reserve. For this reason, I continue to strongly encourage banks to raise concerns they have with their supervision. The Federal Reserve has designed its supervisory process to promote consistency and fairness. We welcome direct feedback if banks experience anything to the contrary. Many banks have provided direct feedback—both positive and negative—and continue to do so.
For the reasons I have already discussed, however, I understand that some banks may want to discuss concerns with parties less vested in or engaged in the issues generating their concern. Chairman Bernanke recently highlighted two such outlets. First, the Board of Governors has an ombudsman. As the chairman noted, the ombudsman “mediates complaints, facilitates appeals, and, where appropriate, refers matters to committees of the Board. We are … encouraging bankers to use the ombudsman for matters that cannot be resolved at the local level.”1 Second, the Federal Reserve Bank of Minneapolis has a formal appeals process. Banks can find a complete description of the process on the Banking section of our web page.
The Federal Reserve continues to explore additional tools to allow banks to provide feedback. As part of that effort, a new form has been created that banks or anyone in the public can use to send their feedback to me directly and anonymously.2 You can find the form here. Note that this tool does not replace the options the chairman highlighted.
In the meantime, please provide direct feedback—positive or negative—to me and anyone else you work with at the Minneapolis Fed. We learn from it. We improve from it. And the public is better served when we receive it.