Honesty about regulatory impact

by | Mar 15, 2024 | Articles

3-4 min read


I’m aware “impact” is an overused word, and sometimes we even find ourselves using that noun as a verb. Not a fan of either. But sometimes, it’s exactly the right word for a situation. Before I address such a situation, a quick aside.

Impact vs. influence

In a 2023 podcast, Andy Crouch talked about impact versus influence.1 As I’ve been thinking and writing and talking about influence, discovering his thoughts on the topic was very helpful and timely.2

Crouch notes that impact is a prominent goal in our culture, but that that focus is not always helpful or fruitful (my paraphrase). And Crouch persuasively asserts that influence is what I’d call “the more excellent way.” But we can’t ignore impact – those instances where, to use Crouch’s formulation, powerful force affects us and does so with high velocity (my paraphrase again).

Our current hyper-regulatory environment

And that’s exactly what businesses of all types across the United States face right now. Not just now, but very definitely right now: lots and lots of impact from additional regulatory burden coming at great speed from multiple federal agencies.3

Of course, any action by a governmental entity involves force, even if it’s only implicit and remote. In criminal cases, it can appropriately involve imprisonment and beyond. In the business realm, force shows up as penalties and fines and regulatory enforcement actions and on and on. And that’s lots of impact, because it’s lots of force (inherently), and we’re experiencing lots of it in short periods of time right now.

Examples from various news sources just this past week:

  • New merger guidelines (read “limitations”) from the FTC and DOJ.
  • A new, much lower limit on credit card late fees from the CFPB.
  • Climate-change disclosure requirements (long awaited…and possibly dreaded) from the SEC.4
  • New rules about FLSA standards for gig-economy folks.

I’m not concerned here with the merits of any of the changes or with the legitimacy of civil government involvement in these topics. What struck me this week was the sheer number of changes (all involving greater burdens or restrictions) and the scope of the affected industries.

A regulator’s honest assessment

And then, in the middle of this same week, I encountered these comments from a banking regulator, Michelle Bowman of the Federal Reserve:

… as I look at the bank regulatory framework agenda, I am struck by the sheer volume of matters that have recently been completed, that have been proposed and that are in the pipeline. These reforms touch on a wide range of topics that directly or indirectly impact banks of all sizes. I expect that the regulatory agenda will remain very active for the foreseeable future, adding further to the already significant collection of rules, guidance and supervisory changes made to date. While I supported some of these recent changes, the vast number of finalized, proposed and potential changes suggest a lack of prioritization—whether we have effectively identified actual risks to the banking system and devoted resources to the most pressing of these issues. The significant volume of revisions also poses a real problem for banks that must review, provide feedback and implement changes….

As I have said in the past, more is not always better when it comes to the rules, guidance, expectations and supervisory standards that apply to banks. In many ways, more can be counterproductive and harmful when it comes to regulatory reform. When reforms are disproportionate to risk or fail to promote safety and soundness in an efficient way, those changes can harm the competitiveness of the U.S. banking system, impede the ability of banks to manage their risks and even result in the allocation of capital by regulators instead of by bank management. Even if the consequences of reforms are unintended, we must consider those consequences and how they may shape the future of the banking system.5

Wrapping up

What I found bracing about Ms. Bowman’s comments was her candor, her transparency—and her plain old-fashioned common sense. Would that others in similar roles understood their roles (and the effects of their work) with similar clarity.

Meanwhile, the rest of us need wisdom and fortitude to move forward with integrity in all we do in our challenging operating environments—whether the regulators make it harder for us or not.


Eric R. Alexander

March 13, 2024


No A.I was employed (or harmed) in the creation of this content.

© 2024, Six Arrows Consulting. All rights reserved.

1 4/1/2023 podcast hosted by Curtis Chang on Redeeming Babel’s Good Faith program.

2 See my 2/2024 blog article on “Influence and leadership,” updated 3/12/2024 to reflect insights from this podcast .

3 I am not arguing here for zero regulation: civil government has a legitimate, indeed divinely appointed, mission. But civil government is demonstrably prone to overstepping, taking on more power than is appropriate. A topic for another time.

4 An interesting dynamic came into play with these SEC requirements: certain parties had been lobbying hard for more extensive reporting requirements, so when the SEC promulgated something not quite as onerous, many affected companies were relieved — relieved the additional burden wasn’t as bad as it could have been. But it is still a material step change in the disclosure burden.

5 From a speech at the Florida Bankers Association Leadership Luncheon in Miami, FL. As reported by the Independent Bankers Association of Texas in a 3/6/2024 Regulatory Dispatch email update. Photo from stlouisfed.org.