Fed's 'tailoring' initiative may be easier said than done

The Federal Reserve is currently debating how to change the way it regulates banks, moving away from using a simple 'asset size' metric to determine which banks face stricter oversight. For retailers and merchants, this might seem like high-level banking talk, but it has direct implications for your financing partners. If the Fed successfully 'tailors' these rules, mid-sized and regional banks—which are the backbone of many consumer lending and private-label credit card programs—could see a reduction in their regulatory compliance costs. However, the challenge is that the Fed is struggling to find a new metric that everyone agrees on. If they can't find a balance, these banks may remain stuck under heavy regulatory burdens that limit their ability to take risks or offer competitive rates. For your business, this means the 'tightness' of the credit market is currently in a state of flux. While there is a push to make it easier for these banks to operate, the technical difficulty of rewriting the rules means you shouldn't expect a sudden surge in lender liquidity or a loosening of credit tiers overnight. We are likely looking at a long period of status quo while regulators argue over the math.

Source: American Banker — Top News

← Return to the library· Submit a correction