Republican senators on the Banking, Housing and Urban Affairs Committee are asking banking regulators to review their process of using Matters Requiring Attention (MRA) in the bank supervisory process.
"If used effectively, these are valuable supervisory tools that can mitigate broader issues and maintain financial stability," 11 GOP senators said in aletterto the FDIC, OCC and the Federal Reserve. "However, we are concerned that the lack of structure, uniformity, and legal basis has allowed the MRA process to become increasingly opaque, ineffective, and inconsistent."
The senators said that MRAs are not specifically mentioned in any law or guidance but were created by the regulatory agencies without public comment. They added that this has led to inconsistent application and "fragmented interpretations" that can create confusion for financial institutions.
"We are concerned that the absence of a clear legal framework provides individual agencies with broad discretion, which has allowed the process to devolve into a subjective supervisory tool, vulnerable to inconsistent application," the senators wrote.
The OCC, Federal Reserve and FDIC have each developed their own internal definitions and standards for issuing and resolving MRAs, they wrote. In addition, banks have no way to challenge MRAs, and regulators face no consequences for failure to follow up on MRAs, according to the senators.
The senators cited Silicon Valley Bank, which had a significant number of MRAs when it collapsed. "Several of the findings reflected known safety and soundness deficiencies in liquidity risk management and interest rate risk modeling—both primary contributors to the bank's collapse," they contended. "Despite the warning signs, SVB maintained a satisfactory rating for management and liquidity."
The senators urged the agencies to make changes to the MRA process to address shortcomings.
"Regulators should reconsider current definitions and establish clear standards and expectations for issuing and resolving MRAs, subject to the rulemaking process under the Administrative Procedure Act," they wrote. They added, "These standards should be uniform across the OCC, Federal Reserve and FDIC, and based on true bank 'safety and soundness.'"
"To restore effectiveness, discipline and consistency into the process, we must ensure that MRAs are used judiciously—reserved for material risks and accompanied by legal grounding and clear expectations," they said.
In addition, regulators should be held accountable for ensuring that problems are resolved in a timely fashion.
The senators concluded, "Without true legal grounding and accountability on both sides, MRAs risk becoming a check-the-box exercise rather than a valuable supervisory tool that can mitigate more widespread risk."
The Republican senators signing the letter are Senate Banking, Housing, and Urban Affairs Chairman Sen. Tim Scott, R-S.C.; Katie Britt, Al.; Mike Crapo, Id.; Michael Rounds, S.D.; Thom Tillis, N.C.; Bill Hagerty, Tenn.; Cynthia Lummis, Wy.; Jim Banks, In.; Kevin Cramer, N.D.; and Dave McCormick, Pa.
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