The Federal Reserve Board recognizes there are “critical differences” between banks and insurance companies, Federal Reserve Board chairman-designate Janet Yellen told a Senate committee at her confirmation hearing Nov. 14.
However, Yellen declined to be hemmed in on how the Fed will deal with that issue, saying only that the Fed is undertaking a study as part of its new responsibilities to oversee systemically important insurers as well as insurers designated as thrift holding companies.
“I do believe that one-size-fits-all should not be the model for regulation and that we need to develop appropriate models for regulation and supervision of different kinds of institutions,” Yellen said in testimony before the Senate Banking Committee. “Insurance certainly has some very unique features that make them very different from banks. And we’re taking the time to try to study what the best way is to craft regulations that would be appropriate for those organizations.”
Sen. Mike Crapo, R-Idaho, ranking minority member of the panel, raised concerns about the Fed’s policies in regulating insurance, but did not pursue them.
Crapo said retiring Fed chairman Ben Bernanke told the committee that legislation is needed to allow the Fed flexibility to deal with the “Collins amendment” and tailor appropriate capital requirements for insurance companies. The Collins amendment requires the Fed to oversee insurers designated as thrift holding companies using the same standards as it uses to regulate banks. Bernanke and Michael Gibson, director of the Fed Division of Banking Supervision and Regulation, have argued the Collins amendment limits the Fed’s ability to regulate insurers differently than banks.
Yellen also said the Fed is undertaking a cost/benefit analysis in advance of a requirement that State Farm switch from statutory accounting principles to Generally Accepted Accounting Principles, a conversion the Fed is considering as part of its new responsibilities as the consolidated regulator of State Farm, which operates a thrift.