{
  "id": "R45051",
  "type": "CRS Report",
  "typeId": "REPORTS",
  "number": "R45051",
  "active": true,
  "source": "EveryCRSReport.com",
  "versions": [
    {
      "source": "EveryCRSReport.com",
      "id": 586192,
      "date": "2017-12-21",
      "retrieved": "2020-01-02T13:46:55.964205",
      "title": "Tailoring Bank Regulations: Differences in Bank Size, Activities, and Capital Levels",
      "summary": "Banking organizations differ across a multitude of characteristics. The amount of assets they hold, the services they provide, and how they secure funding are just a few examples. These differences affect an individual organization\u2019s risk of failure and the risk its failure or distress could pose to the overall financial system. Policymakers generally agree that certain banking regulations should be tailored to account for such differences, and as a result, banks are currently subject to or exempt from various regulations if they meet certain criteria. To what degree existing bank classifications adequately tailor regulation and how tailoring should be designed and implemented are debated issues. This report examines \nexisting and proposed bank regulatory classifications,\nlegislation that proposes to change existing classifications or create new ones, and, \nthe characteristics of bank organizations that fall under existing and proposed classifications.\nBanks are classified in a variety of ways. Some are informal classifications that refer to widely understood differences between community and Wall Street banks\u2014two commonly recognized types of banks\u2014but that are unofficial classifications that do not affect banking regulations. For example, community banks are understood to be small institutions that meet the credit needs of a community and Wall Street banks are understood to be large, complex institutions that could individually pose risk to the financial system. Existing regulatory classifications are official classifications applied to banks that meet some criteria and determine whether a bank is subject to certain regulations. In addition, several existing proposals would establish new regulatory classifications and criteria.\nOften (but not always) existing criteria are size-based thresholds that subject a bank to more stringent regulation once it exceeds a certain amount of assets. Proponents of this system argue simple, \u201cbright line\u201d rules create certainty and transparency and that asset size is an adequate measurement to identify which institutions should or should not be subject to certain regulation. Critics argue it too narrowly focuses on one aspect of a bank organization, and thus may subject certain banks to inappropriate regulation. Critics may argue that new or additional criteria based on other characteristics (e.g., the business activities a bank engages in or the amount of capital it holds) should be implemented.\nTo investigate how well certain criteria would appropriately tailor regulation, it is informative to examine characteristics of banking organizations and compare banks that meet some criteria to those that do not. This report examines characteristics such as asset size; concentrations in loans, deposits, trading assets, and trading liabilities; activity in derivatives; and capital levels. The analysis generally suggests that these characteristics are correlated; larger banks tend to be involved in more business lines and hold less capital whereas smaller banks tend to be more focused on making loans and taking deposits and hold more capital. However, the large number of banks and the high degree of variation across multiple variables means that no set of criteria is easily and objectively identifiable as the best means of tailoring regulations.\nIn the 115th Congress, numerous bills\u2014including H.R. 10, H.R. 1116, H.R. 1948, H.R. 2121, H.R. 3072, H.R. 3312, S. 1002, S. 1284, S. 1499, and S. 1893\u2014would change the existing system of bank regulation tailoring. Some would alter existing size-based classifications or introduce new sized-based criteria, and others would establish new activities-based or capital-based criteria.",
      "type": "CRS Report",
      "typeId": "REPORTS",
      "active": true,
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          "url": "https://www.crs.gov/Reports/R45051",
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      "topics": [
        {
          "source": "IBCList",
          "id": 4870,
          "name": "Banking"
        }
      ]
    }
  ],
  "topics": [
    "Economic Policy"
  ]
}