Here’s one for your mental “Regulatory Follies” folder. Last week the FDIC retroactively downgraded the “Satisfactory” CRA rating it had given Bancorpsouth back in 2013 to “Needs to Improve.” Why? Because, this past June, the company entered into a consent order with two other regulators, the CFPB and Department of Justice, over purported violations of the Equal Credit Opportunity Act and Fair Housing Act.
If the logic of the FDIC’s move eludes you, you’re not alone. Why should the agency reverse a decision it made three years ago based on a years-later action by two other regulators? If the FDIC really did find back then that Bancorpsouth.’s practices were acceptable, then its review process is either a) serious flawed or b) totally subjective. Neither is a good option. Regardless, the agency has so little confidence in how it does things that it seems to be awfully easily swayed by other regulators’ actions. At the very least, the FDIC might have done a quickie sham exam prior to the downgrade to at least convey the illusion that it thinks it knows what it’s doing.
Anyway, the FDIC’s move last week is further proof, if anyone needed any, that banking regulation isn’t based on established rules and regulations the way it should be, but instead on the apparent fact that regulators can do whatever they want, whenever they want. Pathetic.
What do you think? Let me know!