In congressional testimony delivered earlier this week, Margaret Tahyar, Head of the Financial Institutions Group at law firm Davis Polk, called for a sweeping reassessment of US bank supervision, urging transparency, accountability, and a renewed focus on material risks over process-driven oversight.
Before the House Financial Services Committee's Subcommittee on Financial Institutions, Tahyar argued that bank supervision has evolved into a system marked by opacity and discretion, detached from its quantitative roots. The increasing emphasis on qualitative assessments — such as management quality and governance — has given supervisors considerable power without corresponding transparency or oversight, she contended.
She underscored structural deficiencies, including overlapping supervisory mandates, inconsistent appeals processes, and a lack of training transparency for examiners. Additionally, firms risk criminal penalties if they share Confidential Supervisory Information (CSI) with Congress, investors, or overseas regulators. However, US regulators and supervisors selectively decide to publish CSI when it suits them, sometimes through organized leaks. This secrecy, alongside a strictly enforced information asymmetry, curtails meaningful oversight and inhibits policy debate and free speech, she argued.
"We are at a moment where appropriate reforms, made by the federal agencies working together for efficiency, transparency, and fairness, could create change for the better," Tahyar concluded. "Smart reform could unleash a renaissance in the banking sector by permitting banks to lower inefficient expenses and increase lending."
For more from Margaret Tahyar, read her Good Counsel article, "The Supercycle: Where Regional Bank Boards Should Focus," from Starling's 2024 Compendium.
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