February 06, 2014


WASHINGTON  – U.S. Senator Mike Crapo (R-Idaho), Ranking Member of the Senate Banking, Housing and Urban Affairs Committee, today delivered the following remarks during a Banking Committee hearing held to examine regulatory efforts to improve financial stability and explore data security regulatory standards:
Thank you, Mr. Chairman.  I have repeatedly stressed the need for the U.S. banking system and capital markets to remain the preferred destination for investors throughout the world.  While it is too early to tell the extent to which the overall Dodd-Frank rules will make our financial system more stable, federal regulators must ensure that we do not tip the balance of the scales with too heavy a hand.  Otherwise, the cumulative effect of the rules and their interaction with each other may burden the economy far more than any stabilizing benefit.
In addition, it is paramount that the regulators understand the full spectrum of the rules they are implementing and any consequences before finalizing the rules.  This was evident in December when the regulators issued the final Volcker rule and did not realize that accounting rules would force community banks to recognize unrealized market losses.  Regulators worked hard over the holidays to fix this for community banks, but the bigger question is why after three years of promulgating the rule did no regulator foresee this situation?
This incident with the Volker rule only reinforces my belief that we need targeted fixes of various Dodd-Frank provisions.  Some of those fixes include the end-user exemption, swaps push-out and community banks relief, as identified by Chairman Bernanke last year.
In addition to ensuring that regulators take appropriate actions on the rulemaking front, they also must take all steps necessary to ensure that our payments system and financial data are adequately protected.  One of the top priorities for this Committee is protection of consumer financial data and the integrity of the U.S. payments system.  Even the Financial Stability Oversight Council (FSOC) has identified data security as an emerging threat to our financial stability.
At the Subcommittee hearing on Monday, members started a discussion about the standards used to protect consumer data, the payment technologies available, and the roles of all parties in the payments system.
The U.S. payments system is a shared enterprise. While parties approach the system from different positions, everyone recognizes and benefits from the fast, safe and accurate transmission of consumer financial data.  Whether we use credit cards at the gas station, grocery store, or even use our smartphones to purchase a sandwich or a book, we expect our personal information to be protected and not compromised.
Recent data breaches reveal just how much information different entities collect about consumers.  Financial institutions of all sizes face a thorough examination process and oversight by regulators when it comes to data security, but there are many entry points that could be attacked in our payments system.
We must answer three key questions:  First, are the existing regulatory tools adequate to protect all actors in the payments system and capable of safeguarding our financial information?  Second, with so many stakeholders affected by recent data breaches, how can we minimize the damage to consumers, and make the system less vulnerable?  And third, should industry participants consider new technologies that may improve the safety of the payments system, and if so, what technologies are the most appropriate?
Recent hearings have also unveiled that federal regulators, including the witnesses before us today, collect vast amounts of consumer financial data and information.  Regulators still have not provided a sound rationale, in my opinion, for all the data they collect.  Their data collection needs to be as safe and secure as possible so consumers will not have to fear a data breach at the federal government level, and so they do not have to fear the misuse of that data being collected.
Today, our witnesses will address some of these issues and their role in protecting consumers’ financial information and the stability of the payments system, and I look forward to that discussion.  Thank you, Mr. Chairman.