The Economic Growth and Regulatory Paperwork Reduction Act (EGRPRA) of 1996 requires the Federal Financial Institutions Examination Council—an interagency council composed of US banking regulators—to conduct decennial retrospective reviews of existing banking regulations, with an emphasis on reducing regulatory burden. EGRPRA reviews provide a lens to study the political economy of banking regulation before and after the global financial crisis (GFC) of 2007–2009. Through comparative case studies of EGRPRA reviews in 2007 and 2017, this article documents how ex post impact assessment of banking regulation and stakeholder participation in banking regulatory processes have changed over the last 10 years. Using within-case process tracing and content analysis of an original dataset of government documents and public input, this article analyzes the extent to which changes in review processes, participation, and outcomes can be attributed to the policy shock of the GFC and/or shifting political, regulatory, and/or market contexts. The results suggest that government–market interactions have changed considerably since the GFC and that regulatory politics explain many of these changes. While retrospective review and stakeholder participation therein may enable more effective and legitimate regulations and rulemaking processes, much work remains to realize these potential benefits in banking regulation.
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The photo was captioned ‘Determined to Cut Red Tape and Reduce Regulatory Burden’ and depicted Office of Thrift Supervision Director James Gilleran, Jim McLaughlin of the American Bankers Association, Harry Doherty of America’s Community Bankers, FDIC Vice Chairman John Reich, and Ken Guenther of the Independent Community Bankers of America.
For example, Executive Order 13563 calls for an ‘open exchange of information and perspectives’ and ‘a meaningful opportunity to comment’ for administration-wide retrospective reviews, but do not dictate how agencies must respond to comments. Similarly, the Administrative Procedure Act (APA) of 1946 (5 U.S.C. §§ 551–559, 701–706), which is the primary legislative foundation for participation in U.S. rulemaking, does not dictate how agencies must utilize public comments, but rather states: ‘After consideration of the relevant matter presented, the agency shall incorporate in the rules adopted a concise general statement of their basis and purpose’. The APA also provides stakeholders the ‘right to petition for the issuance, amendment, or repeal of a rule’ thereby providing a mechanism to initiate retrospective review. However, subsequent judicial challenges (e.g., United States v. Nova Scotia Food Products Corp  568 DC F.2d 240) have created incentives for agencies to respond to comments more directly.
The US Supreme Court first established in Davis v. Elmira Savings Bank ( 161 U.S. 275)—and has reinforced in numerous subsequent cases—that national banks are ‘instrumentalities of the federal government’.
EGRPRA processes in both 2007 and 2017 incorporated participation via written comments and outreach sessions. Only the former provides a comparable basis across the two periods because outreach sessions were not recorded, nor are transcripts available for 2007. FFIEC published an unattributed summary of major issues from outreach sessions for 2007, whereas in 2017 FFIEC did not produce a summary but published video recordings and transcripts for all sessions. As such, while input from outreach sessions is described in certain instances, all comparative quantitative indicators are based on comments. A codebook is provided in Appendix A. All content analysis of comments includes form letters, but a replicated analysis without form letters is available in Appendix B.
NCUA, led by Dennis Dollar and JoAnn Johnson, conducted a separate voluntary decennial review; the NCUA 2007 review is not included in this analysis.
June 16, 2003: Agencies’ overall regulatory review plan and (1–3) (68 Federal Register 35589); January 20, 2004: (4) (69 Federal Register 2852); July 20, 2004: (5) (69 Federal Register 43347); February 3, 2005: (6–8) (70 Federal Register 5571); August 11, 2005: (9–11) (70 Federal Register 46779); and January 4, 2006: (12–13) (71 Federal Register 287).
The website established for the 2007 EGRPRA review is no longer active.
NCUA, led by Debbie Matz, conducted a separate voluntary decennial review and CFPB, led by Richard Cordray, conducted a separate review process pursuant to the Dodd–Frank Act; neither the NCUA nor CFPB 2017 reviews are included in this analysis.
June 4–September 2, 2014: (1–3) (79 Federal Register 32172); February 13–May 14, 2015: (4–6) (80 Federal Register 7980); June 5–September 3, 2015: (7–9) and newly listed rules (80 Federal Register 32046); and December 23, 2015–March 22, 2016: (10–12) (81 Federal Register 1923).
The website used in the 2017 review is still active: https://egrpra.ffiec.gov/.
All approximate figures are based on FFIEC summaries in EGRPRA reports and all exact figures are based on original empirical analysis. Unless otherwise stated, all comment analysis includes form letters.
This generalization does not hold for all rules. For example, the most participants in rulemaking pursuant to section 619 of the Dodd–Frank Act (i.e., the Volcker Rule) were individuals, although there was a substantial number of form letters organized by public interest groups.
Comments are used as the unit of analysis throughout this article. However, it should be noted that comments varied substantially in length and substance and that the scope of rules, polices, and issues discussed also varied considerably, with some comments on entire statutes and others on a single line in a particular rule.
According to FFIEC, the outreach sessions covered a similar set of issues, with the 10 most common topics covering: ‘(1) Bank Secrecy Act, including Suspicious Activity Reports (SARs) and Currency Transaction Reports (CTRs); (2) USA PATRIOT Act and ‘Know Your Customer’ Requirements; (3) Withdrawal Limits on Money Market Deposit Accounts (Regulation D); (4) Home Mortgage Disclosure Act (HMDA); (5) Community Reinvestment Act (CRA); (6) Truth-in-Lending Act (Regulation Z) and the Real Estate Settlement Procedures Act (RESPA); (7) Three-Day Right of Rescission; (8) Extensions of Credit to Insiders (Regulation O); (9) Flood Insurance; and (10) Privacy Notices’.
E.g. FFIEC-2003-0001-0005, FFIEC-2014-0001-00030, FFIEC-2003-0001-0011.
Arguments about statutory interpretation are coded as ‘other’ evidence.
One exception is trade associations’ periodic surveys of regulatory burdens; however, these surveys rely on self-reporting and are not systematic. FFIEC-2014-0001-0015; FFIEC-2003-0001-0001.
For example, ICBA observed that while banking agencies perceived the first EGRPRA review to be successful, changes as a result of the 2007 review ‘hardly made an impact on the overall regulatory burden that now confronts community banking’ (FFIEC-2014-0001-0036).
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Appendix A: Content analysis codebook
Bank or bank employee: Insured depository institution or other financial institution offering intermediation services (e.g., savings and loans, thrifts, mortgage lenders), or their representatives.
Bank without details: self-identification as a bank/bank employee without identification of bank size.
Small or community bank: ≤ 1B assets or self-identification as a small or community bank/bank employee.
Midsize bank: > 1B ≤ 50B assets or self-identification as a midsize bank/bank employee.
Large bank: > 50B assets or self-identification as a large or systemically important (e.g., GSIB, SIFI) bank/bank employee.
Trade, industry, or professional association: Association representing the commercial sector or a consortium of firms.
Professional services provider: Appraisal, accounting, legal, and other firm or individual that provides banks with professional services, or their representatives.
Cross-sector coalition or quasi-governmental entity: Private association of public entities or coalition of public and private sector entities.
Government: Federal, state, or local government agency or official.
Think tank or policy research organization: Organization primarily involved in policy research.
Consumer, community, or public interest organization: Organization primarily involved in policy advocacy for consumer, community, or public interests.
Consumer or citizen: Individual representing his/her own non-commercial interests.
Decrease regulation: Suggestion to rescind rule or decrease rule stringency or scope (e.g., removing requirement, raising a threshold).
Increase regulation: Suggestion to promulgate rule or increase rule stringency or scope (e.g., adding requirement, lowering threshold).
Preserve status quo: Suggestion to preserve rule or expression of support for rule as is.
Procedural: Suggestion related to EGRPRA or rulemaking process.
Other: Suggestion that is neither pro-regulatory nor deregulatory (e.g., reconciling requirements, clarifying language) or comment that suggests a review with no recommendations for revision.
Benefits: Discussion of benefits associated with a current or proposed rule, policy, or issue for either the submitter and/or an identified set of stakeholders (e.g., consumers). For a proposed new regulation or regulatory change, the benefit could be described as the consequences of not regulating.
Burdens: Discussion of burdens or costs associated with rule, policy, or issue for either the submitter and/or an identified set of stakeholders (e.g., lenders)
Operational cost: Costs associated with compliance.
Opportunity Cost: Costs associated with forgone opportunities.
Relative burden: Comments about the relative burdens faced by institutions based on their size or type (i.e., relative to other financial institutions, not relative to benefit).
Outdated or unnecessary: Discussion of redundancy, inconsistency, or other issues requiring updating and/or the reasoning that a rule, policy, or issue, as written, is unnecessary, ineffective, or producing unintended consequences.
Other: Evidence that does not fit into the categories above, such as misalignment with legislative intent or issues of fairness not relative to other financial institutions.
Appendix B: Replicated analysis of EGRPRA comments with and without form letters
Replicated analysis with form letters includes all data in sample (n = 891). Replicated analysis without form letters excludes all form letters except the first occurrence of each form letter (n = 397). Recall that number of comments by submitter category and by issue area are mutually exclusive, but all other categories are not mutually exclusive because comments may include more than one recommendation or type of evidence.
Number of comments by submitter category
|Private interests||Public interests|
|Bank or bank employee||Trade, industry, or professional association||Professional services provider||Cross-sector coalition or quasi-governmental entity||Government||Think tank or policy research organization||Consumer, community, or public interest organization||Consumer or citizen|
|With form letter (n = 819)|
|(n = 591)||91.5%||4.6%||1.0%||1.5%||0.3%||0.0%||0.5%||0.5%|
|(n = 228)||9.6%||23.7%||54.8%||4.4%||0.9%||0.4%||4.8%||1.3%|
|Without form letter (n = 397)|
|(n = 220)||80.0%||11.4%||2.7%||2.3%||0.9%||0.0%||1.4%||1.4%|
|(n = 159)||13.8%||33.3%||36.5%||5.7%||1.3%||0.6%||6.9%||1.9%|
Number of comments by issue area
|Review plan; applications and reporting; powers and activities; international operations||Lending (consumer protection)||Deposit accounts/relationships (consumer protection)||AML; safety and soundness; securities||Banking operations; directors, officers, and employees; rules of procedure||Prompt corrective action; Disclosure and reporting of CRA-related agreements|
|2007 With (n = 591) and without (n = 220) form letters|
|(n = 591)||3.0%||60.7%||18.3%||14.2%||3.4%||0.3%|
|(n = 220)||8.2%||37.3%||17.3%||28.6%||7.7%||0.9%|
|Applications and reporting; powers and activities; international operations||Banking operations; capital; community reinvestment act||Consumer protection; directors, officers, and employees; money laundering; newly listed rules||Rules of procedure; safety and soundness; securities|
|2017 With (n = 228) and without (n = 159) form letters|
|(n = 228)||18.9%||9.2%||4.4%||67.5%|
|(n = 159)||27.0%||12.6%||6.3%||54.1%|
Number of comments by revisions suggested
|Decrease regulation||Increase regulation||Preserve status quo||Procedural||Other|
|With form letters (n = 819)|
|(n = 591)||86.1%||2.7%||2.9%||3.4%||79.0%|
|(n = 228)||27.2%||7.9%||59.2%||14.0%||26.8%|
|Without form letters (n = 397)|
|(n = 220)||65.9%||5.9%||6.4%||8.6%||46.4%|
|(n = 159)||38.4%||11.3%||42.8%||20.1%||38.4%|
Number of comments by evidence type provided
|Benefits||Burdens||Outdated or unnecessary||Other evidence|
|Evidence type with form letters (n = 819)|
|(n = 591)||20.6%||82.1%||78.2%||4.4%|
|(n = 228)||75.0%||24.6%||28.1%||8.3%|
|Operational cost||Opportunity cost||Relative burden|
|Disaggregation of burdens with form letters (n = 541)|
|(n = 485)||94.8%||2.3%||64.9%|
|(n = 56)||71.4%||32.1%||33.9%|
|Benefits||Burdens||Outdated or unnecessary||Other evidence|
|Evidence type without form letters (n = 397)|
|(n = 220)||16.4%||54.5%||64.1%||11.4%|
|(n = 159)||65.4%||34.6%||39.6%||11.9%|
|Operational cost||Opportunity cost||Relative burden|
|Disaggregation of burdens without form letters (n = 175)|
|(n = 120)||79.2%||9.2%||41.7%|
|(n = 55)||70.9%||30.9%||32.7%|
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Cite this article
DeMenno, M.B. Banking on burden reduction: how the global financial crisis shaped the political economy of banking regulation. J Bank Regul 21, 315–342 (2020). https://doi.org/10.1057/s41261-019-00120-1
- Banking regulatory reform
- Global financial crisis
- Regulatory politics
- Ex post impact assessment
- Stakeholder participation
- Political economy of finance