ICBA leader: CFPB cuts complicating supervision of largest banks

The reduced size of the Consumer Financial Protection Bureau is making it harder to supervise consumer compliance at the largest banks, said Independent Community Bankers of America President and CEO Rebeca Romero Rainey. .Romero Rainey’s comments came July 28 during a panel discussion at BankIn Minnesota’s annual state convention at Treasure Island Resort & Casino. The panel, moderated by BankNews.com/BankBeat magazine Publisher/President Tom Bengtson, also included Christopher Windberg from the OCC; Erik Beishir from the Federal Reserve Bank of Minneapolis; Dana L. Pape from the FDIC; and Michael Crow from the Minnesota Department of Commerce.Romero Rainey said she is concerned about the CFPB’s downsizing as it is the main federal agency tasked with supervising for consumer compliance and examination of banks with more than $10 billion in assets. Under Acting Director Russell Vought, the bureau has dropped dozens of enforcement actions and dismissed pending lawsuits, while significantly cutting staff. President Donald Trump nominated Brian Johnson as director of the bureau in June. His nomination still needs Senate approval. The CFPB’s proposed Section 1033 is currently delayed by a federal court as unenforceable, and is undergoing administrative rewriting. The law would allow customers to access and share their personal financial information with third-party applications and services. Romero Rainey said she is concerned crypto and fintech companies would have access to bank data without the necessary safeguards. .The more than hour-long discussion also focused on artificial intelligence and regulatory relief for community bankers. Though banking conditions remain stable, any downturn could be challenging for less-experienced regulators who have not gone through a similar situation, said Michael Crow, deputy commissioner of the Financial Institutions Division at the Minnesota Department of Commerce. Federal Reserve Bank of Minneapolis Supervisory Examiner Erik Beishir said fraud remains top of mind, with agriculture conditions worse in the far western areas of the district. FDIC Minneapolis Field Officer Dana Pape said bankers are starting to see notice of proposed rulemakings signaling relief for community bankers through regulatory tailoring. The OCC and FDIC have issued proposals restricting enforcement and supervisory actions such as Matters Requiring Attention only to material financial risks and actual legal violations. In May, the Federal Financial Institutions Examinations Council proposed the first significant overhaul of the CAMELS rating system in three decades. The proposal would remove the directive granting special consideration to the management part of the index when finalizing the composite score. OCC assistant deputy controller, Windberg said regulators have shifted their approach to risk-based supervision from de-risking past Dodd-Frank. Smaller banks are “cautiously implementing” AI, with limited widespread adoption, he added. Windberg said banks considering using AI should decide how it can help solve a specific issue — fraud detection, cyber defense or credit administration. Crow said AI has “a lot of potential” for banks, despite its large onboarding expense. Regulators under the Trump administration have shown relative openness to banks using the technology. In June, Trump signed an executive order for the Treasury and Department of Homeland Security to expand AI-powered cybersecurity tools to community banks. Pape said banks should describe to regulators their understanding of AI risks along with how they plan to comply with BSA/AML requirements. Crow said banks can offer customers the chance to store stablecoins as a digital assets custodian segregated from their balance sheets. Even banks that do not plan to custody digital assets should consider how they will impact the industry as a whole, Windberg added.