The House FinServ Financial Institutions and Consumer Credit Subcommittee convened a hearing today to evaluate H.R. 3461, the Financial Institutions Examination Fairness and Reform Act (see FSM Report REFORM71), a bill introduced late last year by Subcommittee Chairman Capito (R-WV) and Ranking Member Maloney (D-NY) that would change examination standards relating to commercial loans in nonaccrual and establish an over-arching Ombudsman to investigate bank complaints about their examiners.  Almost all Members expressed support for the bill, chastising regulators for not doing enough to ease the regulatory burden on community banks and noting that the measure was introduced in response to complaints they had received from constituents about inconsistent examination standards and problems with the examination appeals process.  Regulators from the FRB, FDIC, OCC and NCUA were united in opposition to the legislation, citing a number of ways in which it would undermine safety and soundness at regulated institutions.  Notably, the clause in the bill that would extend to the CFPB the protection against privilege waiver documents was not discussed by regulators at today’s hearing.  Based on Members’ seemingly overwhelming support for the bill, it will likely be approved by the Subcommittee and advance to the full committee.  This report analyzes today’s hearing.

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