Operational Risk Capital Requirements for Banking Organizations

Floor Speech

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Mr. ZELDIN. Mr. Speaker, I thank Chairman Hensarling for all of his leadership and for recognizing me to be able to rise in strong support of this bipartisan legislation introduced by my colleagues on the Financial Services Committee, Congressman Blaine Luetkemeyer and Congressman Gregory Meeks.

Like so many regulations imposed by the 2010 Dodd-Frank law, the current set of operational risk capital requirements imposed on America's financial institutions place a one-size-fits-all solution on banks, regardless of their capitalization, their various lines of business, and the customers they serve.

The current standard under Dodd-Frank requires banks to look back and hold operational risk capital against discontinued business activities or products. In plain English, this means banks are being forced to hold capital to hedge against a fictitious risk of a loan or a product discontinued years ago.

This is not an effective way to determine capital requirements, nor is it in line with the real risk these standards are meant to protect consumers from.

This is hurting consumers by making credit less available in the marketplace, and this especially hurts the small- and medium-size hometown banks that our communities rely on.

To my constituents on Long Island, and to hardworking American families across our country, the consequences of these misguided regulations are more costly loans and less available mortgages. These are the financial products that help small-business owners expand and hire or help families buy a new home.

H.R. 4296 reforms operational risk requirements so they can be focused on a bank's current activities and line of business. This legislation keeps sound standards in place so that banks must avoid risky behavior while also freeing up needed capital so that it can be lent to consumers, not be needlessly held up in a vault to meet a misguided government mandate.

By ensuring that capital standards are transparent, fair, and based on real-life economic conditions, this bipartisan solution removes a troubling roadblock to capital that would otherwise be allocated to consumers, homeowners, and businesses.

Mr. Speaker, I want to again applaud the bipartisan teamwork of my colleagues Blaine Luetkemeyer and Gregory Meeks. I also want to thank Chairman Hensarling for all of his leadership on this important issue and so many others, and I urge all of my colleagues to vote ``yes'' on this important bipartisan bill.

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