General Information & Client Service
  • Americas: +1.212.553.1653
  • Asia: +852.3551.3077
  • China: +86.10.6319.6580
  • EMEA: +44.20.7772.5454
  • Japan: +81.3.5408.4100
Media Relations
  • New York: +1.212.553.0376
  • London: +44.20.7772.5456
  • Hong Kong: +852.3758.1350
  • Tokyo: +813.5408.4110
  • Sydney: +61.2.9270.8141
  • Mexico City: +001.888.779.5833
  • Buenos Aires: +0800.666.3506
  • São Paulo: +0800.891.2518
January 30, 2018

The U.S. GAO published an annual report examining the extent to which, and how, financial regulators performed the required Regulatory Flexibility Act (RFA) analyses and established policies and procedures for complying with the RFA requirements, among other objectives. GAO reviewed the RFA section of financial regulators’ Federal Register notices of rule making, related internal work papers, and policies and procedures for conducting RFA analyses. GAO also determined the extent to which regulators’ analyses reflected RFA requirements, guidance issued by the Office of Advocacy, and OMB guidance on regulatory analysis.

To comply with the RFA, agencies must assess the rule’s potential impact on small entities and consider alternatives that may minimize any significant economic impact of the rule. Alternatively, agencies may certify that a rule would not have a significant economic impact on a substantial number of small entities. GAO found several weaknesses with the analyses of six financial regulators—FED, OCC, FDIC, SEC, CFTC, and CFPB—that could undermine the goal of RFA and limit transparency and public accountability, as shown in the following examples:

  • Certifications. In certifications for rules that regulators determined may affect small entities, regulators conducted analyses to support their conclusions. GAO found that, in general, analyses across all regulators lacked key information the Small Business Administration’s Office of Advocacy and the OMB recommend. Missing information included discussions of data sources or methodologies, consideration of broader economic impact of the rule making, and definitions of the criteria regulators used for substantial number and significant economic impact.
  • Regulatory flexibility analyses. In many of the initial and final regulatory flexibility analyses that GAO reviewed, financial regulators’ evaluation of key components required by RFA—potential economic effects and alternative regulatory approaches—was limited. Most regulators (five of six) did not disclose data sources or methodologies used for their analyses, as OMB recommends. For most rules that GAO reviewed, regulators (five of six) were unable to provide documentation supporting their regulatory flexibility analyses, as OMB recommends, including analyses supporting certification decisions. However, the extent of documentation varied by regulator.

Federal internal control standards state the importance for agency management to establish policies and procedures to achieve objectives. All but one of the financial regulators have guidelines that restate RFA requirements for certification and for preparing regulatory flexibility analyses and provide some information on how to approach these analyses. However, these regulators generally have not developed specific policies and procedures to assist staff in complying with RFA, which may contribute to the weaknesses GAO identified in the analyses. By not developing and implementing comprehensive policies and procedures for RFA analyses, regulators’ ability to consistently and effectively meet RFA objectives may be limited. GAO is making 10 recommendations among the six financial regulators reviewed, including that regulators develop and implement specific policies and procedures for consistently complying with RFA requirements and related guidance for conducting RFA analyses. Five agencies generally agreed with the recommendations and one did not provide written comments.


Related Link: Press Release

Keywords: Americas, US, Banking, Securities, Regulatory Flexibility Act, Regulatory Flexibility Analyses, GAO

Related Insights

US Agencies Propose Revisions to FFIEC Reports 031, 041, 051, and 101

US Agencies (FDIC, FED, and OCC) propose to extend for three years, with revision, FFIEC 031, FFIEC 041, FFIEC 051, and FFIEC 101.

February 21, 2019 WebPage Regulatory News

OFR Adopts Data Collection Rule on Centrally Cleared Repo Transactions

OFR adopted a final rule to establish a data collection covering centrally cleared funding transactions in the U.S. repurchase agreement (repo) market.

February 20, 2019 WebPage Regulatory News

FHFA Finalizes Rule on Federal Home Loan Bank Capital Requirements

FHFA published, in Federal Register, the final rule to adopt, as its own, portions of the regulations of the Federal Housing Finance Board pertaining to the capital requirements for the Federal Home Loan Banks.

February 20, 2019 WebPage Regulatory News

PRA Publishes PS4/19 on Loss-Absorbency Mechanism Under Solvency II

PRA published a policy statement (PS4/19) that provides feedback on responses to the consultation paper (CP27/18) on adjusting for the reduction of loss absorbency where own fund instruments are taxed on write down under Solvency II.

February 20, 2019 WebPage Regulatory News

SRB Publishes Framework for Performing Valuations in Resolution

The framework provides independent valuers and the general public with an indication of the expectations of SRB on the principles and methodologies for valuation reports, as set out in the legal framework.

February 19, 2019 WebPage Regulatory News

BIS Paper on Effect of Securities Lending on OTC Market Liquidity

BIS published a working paper that studies how securities lending affects over-the-counter market (OTC) liquidity.

February 19, 2019 WebPage Regulatory News

US Agencies Extend Consultation Period for the Proposed SA-CCR

US Agencies (FDIC, FED, and OCC) extended the comment period for a proposed rule to update their standards for how firms measure counterparty credit risk posed by derivative contracts.

February 18, 2019 WebPage Regulatory News

FED Extends Consultation Period for Stress Testing Rule

FED has published in the Federal Register a notice proposing amendments to the company run and supervisory stress test rules.

February 15, 2019 WebPage Regulatory News

EBA Single Rulebook Q&A: Third Update for February 2019

EBA published answers to two questions under the Single Rulebook question and answer (Q&A) updates for this week.

February 15, 2019 WebPage Regulatory News

SEC Proposes Rule on Risk Mitigation Techniques for Uncleared SBS

SEC proposed a rule that would require the application of specific risk-mitigation techniques to portfolios of security-based swaps (SBS) that are not submitted for clearing.

February 15, 2019 WebPage Regulatory News
RESULTS 1 - 10 OF 2623