You are given two reports by the government agency.  

Report 1:
Banks play a central role in the financial system by connecting borrowers to savers and allocating available funds across the economy. As a result, banking is vital to the U.S. economy's health and growth. Nevertheless, banking is an inherently risky activity involving extending credit and undertaking liabilities. Therefore, banking can generate tremendous societal and economic benefits, but banking panics and failures can create devastating losses. Over time, a regulatory system designed to foster the benefits of banking while limiting risks has developed, and both banks and regulatio n have coevolved as market conditions have changed and different risks have emerged. For these reasons, Congress often considers policies related to the banking industry. The last decade has been a transformative period for banking. The 2007-2009 financial crisis threatened the total collapse of the financial system and the real economy. Many assert only huge and unprecedented government interventions staved off this collapse. Others argue that government interventions were unnecessary or potentially exacerbated the crisis. In addition, many argue the crisis revealed that the financial system was excessively risky and the regulatory regime governing the financial system had serious weaknesses. Policymakers responded to the perceived weaknesses in the pre-crisis financial regulatory regime by implementing numerous changes to financial regulation, including to bank regulation. Most notably, Congress passed the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act; P.L. 111-203 ) in 2010 with the intention of strengthening regulation and addressing risks. In addition, U.S. bank regulators have implemented changes under their existing authorities, many of which generally adhere to the Basel III Accords—an international framework for bank regulation agreed to by U.S. and international bank regulators—that called for making certain bank regulations more stringent. In the ensuing years, some observers raised concerns that the potential benefits of those regulatory changes (e.g., better-managed risks, increased consumer protection, greater systemic stability, potentially higher economic growth over the long term) were outweighed by the potential costs (e.g., compliance costs incurred by banks, reduced credit availability for consumers and businesses, potentially slower economic growth). In response to these concerns, Congress passed the Economic Growth, Regulatory Relief, and Consumer Protection Act (EGRRCP Act; P.L. 115-174 ). Among other things, the law modified certain (1) regulations facing small banks; (2) regulations facing banks large enough to be subjected to Dodd-Frank enhanced regulation but still below the size thresholds exceeded by the very largest banks; and (3) mortgage regulations facing lenders including banks. In addition, federal banking regulatory agencies—the Federal Reserve (the Fed), the Office of the Comptroller of the Currency (OCC), and the Federal Deposit Insurance Corporation (FDIC)—have proposed further changes in regulation. Implementing the regulatory changes prescribed in the aftermath of the crisis and made pursuant to the Dodd-Frank Act occurred over the course of years. In recent years—a period in which the leadership of the regulators has transferred from Obama Administration to Trump Administration appointees—the banking regulators have expressed the belief that, after having viewed the effects of the regulations, they now have the necessary information to determine which regulations may be ineffective or inefficient as currently implemented. Recently, these regulators have made of number of proposals with the aim of reducing regulatory burden. A key issue surrounding regulatory relief made pursuant to the EGRRCP Act and regulator-initiated changes is whether regulatory burden can be reduced without undermining the goals and effectiveness of the regulations. Meanwhile, market trends and economic conditions continue to affect the banking industry coincident with the implementation of new regulation. Some of the more notable conditions include the development of new technologies used in financial services (known as "fintech") and a rising interest rate environment following an extraordinarily long period of very low rates. This report provides a broad overview of selected banking-related issues, including issues related to "safety and soundness" regulation, consumer protection, community banks, large banks, what type of companies should be able to establish banks, and recent market and economic trends. This report is not an exhaustive look at all bank policy issues, nor is it a detailed examination of any one issue. Rather, it provides concise background and analyses of certain prominent issues that have been the subject of recent discussion and debate. In addition, this report provides a list of Congressional Research Service reports that examine specific issues. Banks face a number of regulations intended to increase the likelihood that banks are profitable without being excessively risky and prone to failures; decrease the likelihood that bank services are used to conceal the proceeds of criminal activities; and to protect banks and their customers' data from cyberattacks. This section provides background on these "safety and soundness" regulations and analyzes selected issues related to them, including prudential regulation related to capital requirements and the Volcker Rule (which restricts proprietary trading); requirements facing banks related to anti-money laundering laws, such as the Bank Secrecy Act (P.L. 91-508); and challenges related to cybersecurity. Bank failures can inflict large losses on stakeholders, including taxpayers via government "safety nets" such as deposit insurance and Federal Reserve lending facilities. Failures can cause systemic stress and sharp contraction in economic activity if they are large or widespread. To make such failures less likely—and to reduce losses when they do occur—regulators use prudential regulation designed to ensure banks are safely profitable and to reduce the likelihood of bank failure. In addition, banks are subject to regulations intended to reduce the prevalence of crime. Some of those are anti-money laundering measures aimed at stopping criminals from using the banking system to conduct or hide illegal operations. Others are cybersecurity regulations aimed at protecting banks and their customers from becoming victims of cybercrime, such as denial-of-service attacks or data theft. Banks profit in part because their assets are generally riskier, longer term, and more illiquid than their liabilities, which allows the banks to earn more interest on their assets than they pay on their liabilities. The practice is usually profitable, but does expose banks to risks that can potentially lead to failure. Failures can be reduced if (1) banks are better able to absorb losses or (2) they are less likely to experience unsustainably large losses. One tool regulators use to increase a bank's ability to absorb losses is to require banks to hold a minimum level of capital. Another tool regulators use to reduce the likelihood and size of potential losses is to prohibit banks from engaging in activities that could create excessive risks. For example, the Volcker Rule prohibits banks from engaging in proprietary trading —the buying and selling of securities that the bank itself owns with the aim of profiting from price changes. The EGRRCP Act mandated certain changes to these prudential regulations, and regulators have proposed changes under existing authorities. Regulators are to promulgate these changes through the rulemaking process in the coming months and years. In addition, whether policymakers have calibrated these regulations such that their benefits and costs are appropriately balanced is likely to be an area of ongoing debate. For these reasons, prudential regulation issues will likely continue to draw congressional attention. A bank's balance sheet is composed of assets, liabilities, and capital. Assets are largely the value of loans owed to the bank and securities owned by the bank. To make loans and buy securities, a bank secures funding by either issuing liabilities or raising capital. A bank's liabilities are largely the value of deposits and borrowings the bank owes savers and creditors. Capital is raised through various methods, including issuing equity to shareholders or special types of bonds that can be converted into equity. Banking is an inherently risky activity, because banks may suffer losses on assets but face rigid obligations on the liabilities owed to depositors and creditors. In contrast to liabilities, capital generally does not obligate the bank to repay or distribute a specified amount of money at a specified time. This characteristic means that, in the event a bank suffers losses, capital gives the bank the ability to absorb some amount of losses while meeting its obligations. Thus, banks can avoid failures if they hold sufficient capital. Banks are required to satisfy several requirements to ensure they hold enough capital. In the United States, these requirements are generally aligned with the Basel III standards developed as part of a nonbinding agreement between international bank regulators. In general, these are expressed as minimum ratios between certain balance sheet items that banks must maintain. A detailed examination of how these ratios are calculated and what levels must be met is beyond the scope of this report. This examination of policy issues only requires noting that capital ratios fall into one of two main types—a leverage ratio or a risk-weighted ratio. A leverage ratio treats all assets the same, requiring banks to hold the same amount of capital against assets regardless of how risky each asset is. A risk-weighted ratio assigns a risk weight—a percentage based on the riskiness of the asset that the asset value is multiplied by—to account for the fact that some assets are more likely to lose value than others. Riskier assets receive a higher risk weight, which requires banks to hold more capital to meet the ratio requirement. Whether the benefits of capital requirements (e.g., increased bank and financial system stability) are generally outweighed by the potential costs (e.g., reduced credit availability) is an issue subject to debate. Capital is typically a more expensive source of funding for banks than liabilities. Thus, requiring banks to hold higher levels of capital may make funding more expensive, and so banks may choose to reduce the amount of credit available. Some studies indicate this could slow economic growth. However, no economic consensus exists on this issue, because a more stable banking system with fewer crises and failures may lead to higher long-run economic growth. In addition, estimating the value of regulatory costs and benefits is subject to considerable uncertainty, due to difficulties and assumptions involved in complex economic modeling and estimation. Lack of consensus also surrounds questions over whether or under what circumstances risk-weighted ratios are necessary, effective, and efficient. Proponents of risk-based measures assert that it is important to use both risk-weighted and leverage ratios because each addresses weaknesses of the other. For example, riskier assets generally offer a greater rate of return to compensate the investor for bearing more risk. Without risk weighting, banks would have an incentive to hold riskier assets because the same amount of capital must be held against risky and safe assets. However, the use of risk-weighted ratios could be problematic for a number of reasons. Risk weights assigned to particular classes of assets could potentially be an inaccurate estimation of some assets' true risk, which could incent banks to misallocate available resources across asset classes. For example, banks held a high level of seemingly low-risk, mortgage-backed securities (MBSs) before the crisis, in part because those assets offered a higher rate of return than other assets with the same risk weight. MBSs then suffered unexpectedly large losses during the crisis. Another criticism is that the risk-weighted requirements involve "needless complexity" and their use is an example of regulatory micromanagement. The complexity could benefit the largest banks that have the resources to absorb the added regulatory cost compared with small banks that could find compliance costs more burdensome. (Small or "community" bank compliance issues will be covered in more detail in the " Regulatory Burden on Community Banks " section later in the report.) Section 201 of the EGRRCP Act is aimed at addressing concerns over the complexity of risk-weighted ratios and the costs they impose on community banks. This provision created an option for banks with less than $10 billion in assets to meet a higher leverage ratio—the Community Bank Leverage Ratio (CBLR)—in order to be exempt from having to meet the risk-based ratios described above. Bank regulators have issued a proposal to implement this provision wherein banks (1) below the threshold that (2) meet at least a 9% leverage ratio measure of equity and certain retained earnings to assets and (3) had limited off-balance sheet exposures and limited securities trading activity (among other requirements) would qualify for the exemption. The FDIC estimates that more than 80% of community banks will be eligible for the CBLR. However, this new optional exemption does not entirely settle the issue. One bank industry group has argued that 9% is set higher than is necessary, excluding deserving banks from the exemption. In addition, bills in the 115 th Congress, notably H.R. 10 , proposed a high-leverage-ratio option be available to banks regardless of size that would exempt qualifying banks from a wider range of prudential regulations. There are also specific policy issues relating to capital requirements for large banks, which are discussed in the " Regulator Proposals Related to Large Bank Capital Requirements " section below. Section 619 of Dodd-Frank—often referred to as the Volcker Rule—generally prohibits depository banks from engaging in proprietary trading or sponsoring a hedge fund or private equity fund. Proprietary trading refers to owning and trading securities for a bank's own portfolio with the aim of profiting from price changes. Put simply, if a bank is engaged in proprietary trading, it is itself an investor in stocks, bonds, and derivatives, which is commonly characterized as "playing the market" or "speculating." The rule includes exceptions for when bank trading is deemed appropriate—such as (1) when a bank is hedging against risks the bank has assumed as a part of its traditional business and (2) market-making (i.e., buying available securities with the intention of quickly selling them to meet market demand). Proprietary trading is an inherently risky activity, and banks have faced varying degrees of restrictions over engaging in this activity for a number of decades. Sections 16, 20, 21, and 32 of the Banking Act of 1933 (P.L. 73-66)—commonly referred to as the Glass-Steagall Act—generally prohibited certain deposit-taking banks from engaging in certain securities markets activities. Over time, regulator interpretation of Glass-Steagall and legislative changes expanded permissible activities for certain banks, allowing them to make certain securities investments and authorizing bank-holding companies to own depositories and securities firms within the same organization. The financial crisis increased debate over whether banks were engaging in unnecessarily risky activities. Ultimately, certain provisions in Dodd-Frank placed restrictions on permissible activities to reduce banks' riskiness, and the Volcker Rule was designed to prohibit proprietary trading by depository banking organizations. One of the Volcker Rule's proponents' main rationales for the separation of deposit-taking and certain securities investments is that when banks analyze and assume risks, they may be subject to moral hazard —the willingness to take on excessive risk due to some outside protection from losses. Deposits are an important source of bank funding and insured (up to a limit on each account) by the government. This arguably reduces depositors' incentive to monitor their banks' riskiness. Thus, a bank could potentially take on excessive risk without concern about losing this funding because, in the event of large losses that lead to failure, at least part of the losses will be borne by the FDIC's Deposit Insurance Fund (which is backed by the full faith and credit of the U.S. government and so ultimately the taxpayer). Thus, supporters of the Volcker Rule have characterized it as preventing banks from "gambling" in securities markets with taxpayer-backed deposits. However, critics of the Volcker Rule doubt its necessity and efficiency. In regard to necessity, they assert that proprietary trading at commercial banks did not play a substantive role in the financial crisis. They note the rule would not have prevented a number of the major events that played a direct role in the crisis—including failures or bailouts of large investment banks and insurers and losses on loans held by commercial banks. On this point, they also argue that proprietary trading risks are no greater than those posed by "traditional" banking activities, such as mortgage lending, and allowing banks to take on risks in different markets might diversify their risk profiles, making them less likely to fail. Debates relating to the efficiency of the Volcker Rule involve its complexity, compliance burden, and potential to lead banks to reduce their engagement in beneficial market activities. Recall that the Volcker Rule is not a ban on all trading, as banks are still allowed to trade to hedge risks or make markets. This poses practical supervisory problems. For example, how can regulators determine whether a broker-dealer is holding a security for market-making, as a hedge against another risk, or as a speculative investment? Differentiating among these motives creates the aforementioned complexity and compliance costs that could affect banks' trading behavior, and so could reduce financial market efficiency. Another criticism of the Volcker Rule in its original form was that it unnecessarily subjected all banks to the rule and their associated compliance costs. Critics of this aspect asserted that the vast majority of community banks are not involved in complex trading activity, but nevertheless must incur costs in evaluating the rule to ensure they are in compliance. Both Congress and regulators have recently taken actions in response to concerns over the complexity of the Volcker Rule and its compliance burden for small banks. Section 203 of the EGRRCP Act exempted banks with less than $10 billion in assets that fell below certain trading activity limits from the rule. Independent of that mandate, the agencies that implemented and enforced the Volcker Rule released and called for public comment on a proposal to simplify the rule in May 2018. Under the proposal, the agencies would clarify certain of the rule's definitions and criteria in an effort to reduce or eliminate uncertainties related to how certain trading activity can qualify for exemption. The proposal would also further tailor the compliance requirements facing banks based on the size of an institution's trading activity. Proponents of the Volcker Rule are generally wary of size-based exemptions. They contend that community banks typically do not face compliance obligations under the rule and do not face an excessive burden by being subject to it. They argue that community banks that are subject to compliance requirements can comply by having clear policies and procedures in place for review during the normal examination process. In addition, Volcker Rule supporters are generally critical of the regulators' proposal, asserting that the changes would undermine "the effective supervision and enforcement" of the rule. Anti-money laundering (AML) regulation refers to efforts to prevent criminal exploitation of financial systems to conceal the location, ownership, source, nature, or control of illicit proceeds. The U.S. Department of the Treasury estimates domestic financial crime, excluding tax evasion, generates $300 billion in illicit proceeds that might involve money laundering. Despite robust AML efforts in the United States, the ability to counter money laundering effectively remains challenged by factors including (1) the diversity of illicit methods to move and store ill-gotten proceeds through the international financial system; (2) the introduction of new and emerging threats such as cyber-related financial crimes; (3) gaps in legal, regulatory, and enforcement regimes; and (4) the costs associated with financial institution compliance with global AML guidance and national laws. In the United States, the statutory foundation for domestic AML originated in 1970 with the Bank Secrecy Act (BSA; P.L. 91-508) and its major component, the Currency and Foreign Transaction Reporting Act. Amendments to the BSA and related provisions in the 1980s and 1990s expanded AML policy tools available to combat crime, particularly drug trafficking, and prevent criminals from laundering their illicitly derived profits. Key elements to the BSA/AML legal framework include requirements for customer identification, recordkeeping, reporting, and compliance programs intended to identify and prevent money laundering abuses. In general, banking regulators examine institutions for compliance with BSA/AML. When a regulator finds BSA violations or deficiencies in AML compliance programs, it may take informal or formal enforcement action, including possible civil fines. The BSA/AML policy framework is premised on banks and other covered financial entities filing a range of reports with the Department of the Treasury's Financial Crimes Enforcement Network (FinCEN), when their clients either engage in suspicious financial transactions, large cash transactions, or certain other transactions. For example, a bank generally must file a Suspicious Activity Report (SAR) if, among other reasons, it conducts a transaction of $5,000 or more that the bank suspects involves money laundering or other criminal activity. A bank must file a Currency Transaction Report (CTR) if it conducts a currency (i.e., cash) transaction of $10,000 or more as to which it has the same suspicions. The accurate, timely, and complete reporting of such activity to FinCEN flags situations that may warrant further investigation for law enforcement. Whether this regulatory framework adequately hinders criminals from using the banking system to launder their criminal proceeds and whether it does so efficiently without unduly burdening banks are debated issues. One aspect of this debate is whether current reporting requirements are inefficient and overly costly to the banking industry. Some industry observers—including officials from the OCC—have indicated that they believe certain areas of the current framework could be reformed in a way that reduces compliance costs without unduly weakening the ability to prevent money laundering. In contrast, officials from other agencies involved in AML and law enforcement—including FinCEN and the FBI—have stressed the importance of the information gathered under the current reporting requirements in combating money laundering. Another area of concern involves beneficial owners —that is, the natural person(s) who own or control a legal entity, such as a corporation or limited liability company. When such entities are set up without physical operations or assets, they are often referred to as shell companies . Shell companies can be used to conceal beneficial ownership and facilitate anonymous financial transactions. In recent years, policymakers have become increasingly concerned regarding potential risks posed by shell companies whose beneficial ownership is not transparent. This is due in part to a series of leaks to the media regarding the use of shell companies to facilitate criminal activity (such as "the Panama Papers") and sustained multilateral criticism of current U.S. practices by the Financial Action Task Force, an international standard-setting body. In May 2018, a new FinCEN regulation came into effect that increased the requirements for banks to conduct customer due diligence (CDD) and ascertain the identity of beneficial owners in certain cases. Central to the CDD rule is a requirement for financial institutions to establish and maintain procedures to identify and verify beneficial owners of a legal entity opening a new account. If Congress decides that reporting requirements facing banks are not appropriately calibrated, it could pass legislation amending those requirements. For example, Congress could change the CTR or SAR reporting threshold or index the threshold levels to inflation. Certain bills introduced in the 115 th Congress would have increased financial transparency and reporting requirements for beneficial owners in other nonbank fields, such as real estate, but could potentially indirectly impact the banking industry as well. Cybersecurity is a major concern of banks, other financial services providers, and federal regulators. In many ways, it is an important extension of physical security. For example, banks are concerned about both physical and electronic theft of money and other assets, and they do not want their businesses shut down by weather events or electronic denial-of-service attacks. Maintaining the confidentiality, security, and integrity of physical records and electronic data held by banks is critical to sustaining the level of trust that allows businesses and consumers to rely on the banking industry to supply services on which they depend. The federal government has increasingly recognized the importance of cybersecurity in the financial services industry, as evidenced by the inclusion of financial services in the government's list of critical infrastructure sectors. The basic authority that federal regulators use to establish cybersecurity standards emanates from the organic legislation that established the agencies and delineated the scope of their authority and functions. As previously discussed, federal banking regulators are required to promulgate safety and soundness standards for all federally insured depository institutions to protect the stability of the nation's banking system. Some of these standards pertain to cybersecurity issues, including information security, data breaches, and destruction or theft of business records. In addition, certain laws (at both the state and federal levels) have provisions related to cybersecurity of financial services that are often performed by banks, including the Dodd-Frank Act, the Gramm-Leach-Bliley Act of 1999 (GLBA; P.L. 106-102 ), and the Sarbanes-Oxley Act of 2002 ( P.L. 107-204 ). For example, Section 501 of GLBA imposes obligations on financial institutions to "respect the privacy of ... [their] customers and to protect the security and confidentiality of those customers' nonpublic personal information." Federal banking regulators require the entities that they regulate to protect customer privacy of physical and electronic records as mandated by the privacy title of GLBA. Federal bank regulators also issue guidance in a variety of forms designed to help banks evaluate their risks and comply with cybersecurity regulations. Regulators bring adjudicatory enforcement actions on a case-by-case basis related to banks' violations of cybersecurity protocols. Banks often view these actions as signaling how an agency interprets aspects of its regulatory authority. For example, a number of recent consent orders issued by the FDIC have directed banks to perform assessments or audits of information technology programs and management to identify risks and ensure compliance with cybersecurity requirements. Thus, oversight of financial services and bank cybersecurity reflects a complex and sometimes overlapping array of state and federal laws, regulators, regulations, and guidance. However, whether this framework is effective and efficient, resulting in adequate protection against cyberattacks without imposing undue cost burdens on banks, is an open question. The occurrence of successful hacks of banks and other financial institutions, wherein huge amounts of individuals' personal information are stolen or compromised, highlights the importance of ensuring bank cybersecurity. For example, in 2014, JPMorgan Chase, the largest U.S. bank, experienced a data breach that exposed financial records of 76 million households. However, no consensus exists on how best to reduce the occurrence of such incidents. Financial products can be complex and potentially difficult for consumers to fully understand. Consumers seeking loans or financial services could be vulnerable to deceptive or unfair practices. To reduce the occurrence of bad outcomes, laws and regulations have been put in place to protect consumers. This section provides background on consumer financial protection and the Bureau of Consumer Financial Protection's (CFPB) authority. The section also analyzes related issues, including whether the CFPB has used its authorities and regulations of banking institutions appropriately; concerns relating to the lack of consumer access to banking services; and whether the Community Reinvestment Act as currently implemented is effectively and efficiently meeting its goal of ensuring banks provide credit to the areas in which they operate. Banks are subject to consumer compliance regulation, intended to ensure that banks are in compliance with relevant consumer-protection and fair-lending laws. Federal laws and regulations in this area take a variety of approaches and address different areas of concern. Certain laws provide disclosure requirements intended to ensure consumers adequately understand the costs and other features and terms of financial products. Other laws prohibit unfair, deceptive, or abusive acts and practices. Fair lending laws prohibit discrimination in credit transactions based upon certain borrower characteristics, including sex, race, religion, or age, among others. The financial crisis raised concerns among policymakers that regulators' mandates lacked sufficient focus on consumer protection. In response, the Dodd-Frank Act established the CFPB with the single mandate to implement and enforce federal consumer financial law, while ensuring consumers can access financial products and services. The CFPB also seeks to ensure the markets for consumer financial services and products are fair, transparent, and competitive. For banks with more than $10 billion in assets, the CFPB is the primary regulator for consumer compliance, whereas safety and soundness regulation continues to be performed by the prudential regulator. As a regulator of larger banks, the CFPB has rulemaking, supervisory, and enforcement authorities. A large bank, therefore, has different regulators for consumer protection and safety and soundness. For banks with $10 billion or less in assets, the rulemaking, supervisory, and enforcement authorities for consumer protection are divided between the CFPB and a prudential regulator. The CFPB may issue rules that apply to smaller banks, but the prudential regulators maintain primary supervisory and enforcement authority for consumer protection. The CFPB has limited supervisory and enforcement powers over small banks. Consumer protection and fair lending compliance continue to be important issues for banks for numerous reasons. Noncompliance can result in regulators taking enforcement actions that may involve substantial penalties. In addition, even in the absence of enforcement actions, an institution faces reputational risks if it comes to be perceived as dealing badly with customers. For example, the CFPB maintains a consumer complaints database that makes public consumer complaints against individual companies readily available, potentially affecting prospective customers' decisions on which companies to use for financial services. The recent public reaction to and enforcement actions pertaining to Wells Fargo's unauthorized opening of customer accounts show the importance of strong consumer protection compliance. Recently, banks and other nonbank financial institutions that provide financial products to consumers (e.g., mortgages, credit cards, and deposit accounts) have been affected by the implementation of new CFPB regulations. For example, banks and other lenders have begun to comply with major new mortgage rules such as the Ability-to-Repay and Qualified Mortgage Standards Rule (ATR/QM) and Truth in Lending Act/Real Estate Settlement Act Integrated Disclosure Rule (TRID). The ATR/QM encourages lenders to gather more information on prospective borrowers than they otherwise might have in order to reduce the likelihood that a borrower would receive an inappropriate loan. TRID requires lenders to provide borrowers with certain information about the mortgages for which they are applying. In addition to these and other new regulations, the CFPB also provides information on its supervisory activities related to banks, such as instances where its examiners found that certain financial institutions misrepresented service fees associated with deposit and checking accounts. Compliance with these new rules has increased banks' operational costs, which some argue potentially leads to higher costs for consumers in certain markets or a reduction in the availability of credit. Others stress that CFPB's regulatory, supervisory, and enforcement efforts reduce the likelihood of consumer harm in financial markets. Debates about how best to achieve the appropriate balance between consumer protection, credit access, and industry costs are unlikely to be resolved easily, and thus may continue to be an area of congressional interest. The banking sector provides valuable financial services for households that allow them to save, make payments, and access credit. Safe and affordable financial services allow households to avoid financial hardship, build assets, and achieve financial security. However, many U.S. households (often those with low incomes, lack of credit histories, or credit histories marked with missed debt payments) do not use banking services. According to the FDIC's National Survey of Unbanked and Underbanked Households, in 2017, 6.5% of households in the United States were unbanked (i.e., did not have an account at an insured institution) and 18.7% of households were underbanked (i.e., obtained financial products and services outside of the banking system in the past year). Lack of bank access leads some households to rely on alternative financial service providers and consumer credit products outside of the formal banking sector, such as payday or auto title loans. According to an FDIC estimate, 12.9% of households had unmet demand for mainstream small-dollar credit. Certain observers believe that financial outcomes for the unbanked and underbanked would be improved if banks—which may be more likely to be a stable source of relatively inexpensive financial services relative to certain alternatives—were more active in meeting this demand. For this reason, prudential regulators, like the OCC and the FDIC, are currently exploring ways to encourage banks to offer small-dollar credit products to consumers, and other policymakers and observers will likely continue to explore ways to make banking more accessible to a greater portion of the population. The Community Reinvestment Act of 1977 (CRA; P.L. 95-128 ) addresses how banking institutions meet the credit needs of the areas they serve, notably in low- and moderate-income (LMI) neighborhoods. The federal prudential banking regulators (the Fed, the OCC, and the FDIC) conduct examinations to evaluate how banks are fulfilling the objectives of the CRA. The regulators issue CRA credits, or points, where banks engage in qualifying activities—such as mortgage, consumer, and business lending; community investments; and low-cost services that would benefit LMI areas and entities—that occur within an assigned assessment area . These credits are then used to issue each bank a performance rating, from Outstanding to Substantial Noncompliance. The CRA requires regulators to take these ratings into account when banks request to merge with other banking institutions or otherwise expand their operations into new areas. Whether regulations as currently implemented are effectively and efficiently meeting the CRA's goals has been the subject of debate. The banking industry and other observers assert that CRA regulations can be altered in a way that would reduce regulatory burden while still meeting the law's goals. Recently, the OCC and Treasury have made proposals to address those concerns. However, consumer and community advocates argue that efforts to provide relief to banks may potentially be at the expense of communities that the CRA is intended to help. Treasury made a number of recommendations to the bank regulators for changes to CRA regulations in a memorandum it sent to those agencies in April 2018. Regarding the need for modernization, the memorandum recommends revisiting the approach for determining banks' assessment areas, given that geographically defined areas arguably may not fully reflect the community served by a bank because of technology developments. Treasury also recommends establishing clearer standards for CRA-eligible activities that provide flexibility and expand the types of loans, investments, and services that are eligible for CRA credit. Regarding aspects of CRA compliance that may be unnecessarily burdensome, Treasury recommends increasing the timeliness of the CRA performance examination process. Regarding improving the outcomes that the CRA was intended to encourage, such as increasing the availability of credit to LMI neighborhoods, Treasury recommendations include incorporating performance incentives that might result in more efficient lending activities. In September 2018, the OCC published an advance notice of proposed rulemaking (ANPR) seeking public comment on 31 questions pertaining to issues to consider and possible changes to CRA regulation. The OCC's ANPR does not propose specific changes, but its content and the questions posed suggest that the OCC is exploring the possibility of adopting a quantitative metric-based approach to CRA performance evaluation, changing how assessment areas are defined, expanding CRA-qualifying activities, and reducing the complexity, ambiguity, and burden of the regulations on the bank industry. The OCC received more than 1,300 comment letters in response to the ANPR that were alternatively supportive or critical of the various possible alterations to CRA regulation. Although some banks hold a very large amount of assets, are complex, and operate on a national or international scale, the vast majority of U.S. banks are relatively small, have simple business models, and operate within a local area. This section provides background on these simpler banks—often called community bank s —and analyzes issues related to them, including regulatory relief for community banks and the long-term decline in the number of community banks. Although there is no official definition of a community bank, policymakers and the public generally recognize that the vast majority of U.S. banks differ substantially from a relatively small number of very large and complex banking organizations in a number of ways. Community banks tend to hold a relatively small amount of assets (although asset size alone need not be a determining factor); be more concentrated in core bank businesses of making loans and taking deposits and less involved in other, more complex activities; and operate within a smaller geographic area, making them generally more likely to practice relationship lending wherein loan officers and other bank employees have a longer standing and perhaps more personal relationship with borrowers. Therefore, community banks may serve as particularly important credit sources for local communities and underserved groups of which large banks may have little familiarity. In addition, relative to large banks, community banks generally have fewer employees, less resources to dedicate to regulatory compliance, and individually pose less of a systemic risk to the broader financial system. Congress often faces policy issue questions related to community banks. Community bank advocates often assert the tailoring of regulations currently in place does not adequately balance the benefits and costs of the regulations when applied to community banks. Concerns have also been raised about the three-decade decline in the number and market presence of these institutions, and the predominant cause of that decline is a matter of debate. In recent decades, community banks, under almost any common definition, have seen their numbers decline and their collective share of banking industry assets fall in the United States. Overall, the number of FDIC-insured institutions fell from a peak of 18,083 in 1986 to 5,477 in 2018. The number of institutions with less than $1 billion in assets fell from 17,514 to 4,704 during that time period, and the share of industry assets held by those banks fell from 37% to 7%. Meanwhile, the number of banks with more than $10 billion in assets rose from 38 to 138, and the share of total banking industry assets held by those banks increased from 28% to 84%. The decrease in the number of community banks occurred mainly through three methods: mergers, failures, and lack of new banks. Most of the decline in the number of institutions in the past 30 years was due to mergers, which averaged more than 400 a year from 1990 to 2016. Failures were minimal from 1999 to 2007, but played a larger role in the decline during the late 1980s and following the 2007-2009 financial crisis and subsequent recession. As economic conditions have improved, failures have declined, but the number of n ew r eporters —new chartered institutions providing information to the FDIC for the first time—has been extraordinarily small in recent years. For example, in the 1990s, an average of 130 new banks reported data to the FDIC per year. Through September 30, five new banks reported data to the FDIC in 2018. Observers have cited several possible causes for this industry consolidation. Some observers argue the decline indicates that the regulatory burden on community banks is too onerous, driving smaller banks to merge to create or join larger institutions, an argument covered in more detail in the following section, " Regulatory Burden on Community Banks ." However, mergers—the largest factor in consolidation—could occur for a variety of reasons. For example, a bank that is struggling financially may look to merge with a stronger bank to stay in business. Alternatively, a community bank that has been outperforming its peers may be bought by a larger bank that wants to benefit from its success. In addition, other fundamental changes besides regulatory burden in the banking system could be driving consolidation, making it difficult to isolate the effects of regulation. Through much of the 20 th century, federal and state laws restricted banks' ability to open new branches and banking across state lines was restricted. Thus, many more banks were needed to serve every community. Branching and banking across state lines was not substantially deregulated at the federal level until 1997 through the Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994 ( P.L. 103-328 ). When these restrictions were relaxed, it became easier for community banks to consolidate or for mid-size and large banks to spread operations to other markets. In addition, there may be economies of scale, not only in compliance, but in the business of banking in general. Furthermore, the economies of scale may be growing over time, which would also drive industry consolidation. For example, information technology has become more important in banking (e.g., cybersecurity and mobile banking), and certain information technology systems may be subject to economies of scale. Finally, the slow growth coming out of the most recent recession, and macroeconomic conditions more generally (such as low interest rates), may make it less appealing for new firms to enter the banking market. Community banks receive special regulatory consideration to minimize their regulatory burden. For example, many regulations—including a number of regulations implemented pursuant to the Dodd-Frank Act—include exemptions for community banks or are otherwise tailored to reduce compliance costs for community banks. Title I and Title II of the EGRRCP Act contained numerous provisions that provided new exemptions to community banks or raised the thresholds for existing exemptions, such as the Community Bank Leverage Ratio and Volcker Rule exemptions discussed above in the " Prudential Regulation " section. In addition, bank regulators are required to consider the effect of rules on community banks during the rulemaking process pursuant to provisions in the Regulatory Flexibility Act ( P.L. 96-354 ) and the Riegle Community Development and Regulatory Improvement Act ( P.L. 103-325 ). Supervision is also structured to pose less of a burden on small banks than larger banks, such as by requiring less-frequent bank examinations for certain small banks and less intensive reporting requirements. However, Congress often faces questions related to whether tailoring in general or tailoring provided in specific regulations is sufficient to ensure that an appropriate trade-off has been struck between the benefits and costs of regulations facing community banks. Advocates for further regulatory relief argue that certain realized benefits are likely to be relatively small, whereas certain realized costs are likely to be relatively large. One area where the benefits of regulation may be relatively small for community banks relative to large banks is regulations aimed at improving systemic stability, because community banks individually pose less of a risk to the financial system as a whole than a large, complex, interconnected bank. Many recent banking regulations were implemented at least in part in response to the systemic nature of the 2007-2009 crisis. Some community bank proponents argue that because small banks did not cause the crisis and pose less systemic risk, they need not be subject to new regulations made in response to the crisis. Opponents of these arguments note that systemic risk is only one of the goals of regulation, along with prudential regulation and consumer protection, and that community banks are exempted from many of the regulations aimed at systemic risk. They note that hundreds of small banks failed during and after the crisis, suggesting the prudential regulation in place prior to the crisis was not stringent enough. Another potential rationale for easing regulations on community banks would be if there are economies of scale to regulatory compliance costs, meaning that regulatory compliance costs may increase as bank size does but decrease as a percentage of overall costs or revenues. Put another way, as regulatory complexity increases, compliance may become relatively more costly for small institutions. Empirical evidence on whether compliance costs are subject to economies of scale is mixed, thus consider this illustrative example to show the logic behind the argument. Imagine a bank with $100 million in assets and 25 employees and a bank with $10 billion in assets and 1,250 employees each determine they must hire an extra employee to ensure compliance with new regulations. The relative burden is larger on the small institution that expands its workforce by 4% than on the large bank that expands by less than 0.1%. From a cost-benefit perspective, if regulatory compliance costs are subject to economies of scale, then the balance of costs and benefits of a particular regulation will differ depending on the size of the bank. For the same regulatory proposal, economies of scale could potentially result in costs outweighing benefits for smaller banks. Due to a lack of empirical evidence of the exact benefits and costs of each individual regulation at each individual bank (and even lack of consensus over which banks should qualify as community banks), debates over the appropriate level of tailoring of regulations is a debate over calibration involving qualitative assessments. Where should the lines be drawn? Should exemption thresholds be set high so that regulations apply only to the very largest, most complex banks? Should thresholds be set relatively low, so that only very small banks are exempt? At what point does a bank cease to have the characteristics associated with community banks? Often at issue in this debate are the so-called regional banks —banks that are larger and operate across a greater geographic market than the community banks but are also smaller and less complex than the largest, most complex organizations with hundreds of billions or trillions of dollars in assets. Should regulators provide regional banks the same exemptions as those provided to community banks? Policymakers, in the 116 th Congress, continue to face these and other questions concerning community banks. Along with the thousands of relatively small banks operating in the United States, there are a handful of banks with hundreds of billions of dollars of assets. The 2007-2009 financial crisis highlighted the problem of "too big to fail" (TBTF) financial institutions—the concept that the failure of a large financial firm could trigger financial instability, which in several cases prompted extraordinary federal assistance to prevent the failure of certain of these institutions. In response to the crisis, policymakers took a number of steps through the Dodd-Frank Act and the Basel III Accords to eliminate the TBTF problem, including subjecting the largest banks to enhanced prudential regulations, a new resolution regime to unwind these banks in the event of failure, and higher capital requirements. This section provides background on these large banks and examines issues related to them, including reductions in the application of enhanced prudential regulations facing certain large banks made pursuant to P.L. 115-174 and changes to capital requirements proposed by regulators that would reduce the amount of capital certain large banks would have to hold. As regulators implement these statutory changes and their proposed rules move forward, Congress faces questions about whether relaxing these regulations appropriately eases overly stringent requirements or unnecessarily increases the likelihood that large banks take on excessive risks. Some bank holding companies (BHCs) have hundreds of billions or trillions of dollars in assets and are deeply interconnected with other financial institutions. A bank may be so large that its leadership and market participants may believe that the government would save it if it became distressed. This belief could arise from the determination that the institution is so important to the country's financial system—and that its failure would be so costly to the economy and society—that the government would feel compelled to avoid that outcome. An institution of this size and complexity is said to be TBTF. In addition to fairness issues, economic theory suggests that expectations that a firm will not be allowed to fail creates moral hazard —if the creditors and counterparties of a TBTF firm believe that the government will protect them from losses, they have less incentive to monitor the firm's riskiness because they are shielded from the negative consequences of those risks. As a result, TBTF institutions may have incentives to be excessively risky, gain unfair advantages in the market for funding, and expose taxpayers to losses. Several market forces likely drive banks and other financial institutions to grow in size and complexity, thereby potentially increasing efficiency and improving financial and economic outcomes. For example, marginal costs can be reduced through economies of scale; risk can be diversified by spreading exposures over multiple business lines and geographic markets; and a greater array of financial products could be offered to customers allowing a bank to potentially attract new customers or strengthen relationships with existing ones. These market forces and the relaxation of certain interstate banking and branching regulations described in the " Reduction in Community Banks " section may have driven some banks to become very large and complex in the years preceding the crisis. At the end of 1997, two insured depository institutions held more than $250 billion in assets, and together accounted for about 9.3% of total industry assets. By the end of 2007, six banks held more than $250 billion in assets, accounting for 40.9% of industry assets. The trend has generally continued, and as of the third quarter of 2018, nine banks held more than $250 billion in assets, accounting for 49.5% of industry assets. Many assert that the worsening of the financial crisis in fall 2008 was a demonstration of TBTF-related problems. Large institutions had taken on risks that resulted in large losses, causing the institutions to come under threat of failure. In some cases, the U.S. government took actions to stabilize the financial system and individual institutions. Wachovia and Washington Mutual were large institutions that were acquired by other institutions to avoid their failure during the crisis. Bank of America and Citigroup received extraordinary assistance through the Troubled Asset Relief Program (TARP) to address financial difficulties. Other large (and small) banks participated in emergency government programs offered by the Treasury (TARP), the Federal Reserve, and the FDIC. In response, the Dodd-Frank Act attempted to end TBTF through (1) a new regulatory regime to reduce the likelihood that large banks would fail; (2) a new resolution regime to make it easier to safely wind down large bank holding companies that are at risk of failing; and (3) new restrictions on regulators' use of emergency authority to prevent "bail outs" of failing large banks. In addition, the Federal Reserve imposed additional capital requirements on the largest banks that largely aligned with proposed standards set out by the Basel III Accords, with some exceptions. To make it less likely that large banks would fail, certain large banks are now subject to an enhanced prudential regulatory regime administered by the Federal Reserve. Under this regime, large banks are subject to more stringent safety and soundness standards than other banks. They must comply with higher capital and liquidity requirements, undergo stress tests, produce living wills and capital plans, and comply with counterparty limits and risk management requirements. To make it easier to wind down complex BHCs with nonbank subsidiaries, the Dodd-Frank Act created the Orderly Liquidation Authority (OLA), a resolution regime administered by the FDIC that is similar to how the FDIC resolves bank subsidiaries. This replaced the bankruptcy process, focused on the rights of creditors, with an administrative process, focused on financial stability, for winding down such firms. To date, OLA has never been used. The Dodd-Frank Act initially applied enhanced prudential regulation requirements to all BHCs with more than $50 billion in assets, although more stringent standards were limited to banks with more than $250 billion in assets or $10 billion in foreign exposure, and the most stringent standards were limited to U.S. globally systemically important banks (G-SIBs), the eight most complex U.S. banks. Subsequent to the enactment of Dodd-Frank, critics of the $50 billion asset threshold argued that many banks above that size are not systemically important and that Congress should raise the threshold. In particular, critics distinguished between regional banks (which tend to be at the lower end of the asset range and, some claim, have a traditional banking business model comparable to community banks) and Wall Street banks ( a term applied to the largest, most complex organizations that tend to have significant nonbank financial activities). Opponents of raising the threshold disputed this characterization, arguing that some regional banks are involved in sophisticated activities, such as being swap dealers, and have large off-balance-sheet exposures. In response to concerns that the enhanced prudential regulation threshold was set too low, P.L. 115-174 exempted banks with between $50 billion and $100 billion in assets from enhanced prudential regulation, leaving them to be regulated in general like any other bank. Under the proposed rule implementing the P.L. 115-174 changes, the Fed has increased the tiering of enhanced regulation for banks with more than $100 billion in assets. The proposed rule would create four categories of banks based on size and complexity, and impose increasingly stringent requirements on each category. From most to least stringent, Category I would currently include the eight G-SIBs, Category II would include one bank, Category III would include four banks, and Category IV would include 11 banks. Compared with current policy, banks in all categories would face reduced regulatory requirements under this rule, other proposed rules, and forthcoming rules required by Section 402 of P.L. 115-174 , if finalized. In addition, P.L. 115-174 created new size-based exemptions from various regulations, increasing the tendency to subject larger banks to more stringent requirements than smaller banks. These changes include exemptions from the Volcker Rule and risk-weighted capital requirements for banks with less than $10 billion in assets (meeting certain criteria). Proponents of the changes assert they provide necessary and targeted regulatory relief. Opponents argue they needlessly pare back important Dodd-Frank protections to the benefit of large and profitable banks. As discussed in the " Capital Requirements " section, all banks must hold enough capital to meet certain capital ratio requirements. Broadly, those requirements take two forms—risk-weighted requirements and unweighted leverage requirements. In addition, a small subset of very large and very complex banks also face additional capital ratio requirements implemented by the U.S. federal bank regulators. The Federal Reserve has made two proposals to simplify and relax certain aspects of these additional requirements, and these proposals are subject to debate. All banks must hold additional high-quality capital on top of the minimum required levels—called the capital conservation buffer (CCB)—to avoid limitations on their capital distributions, such as dividend payments. In addition, certain large banks are subject to the Federal Reserve's stress tests, the results of which can lead to restrictions on the bank's capital distributions. Stress tests are intended to ensure that banks hold enough capital to withstand a hypothetical market stress scenario, but arguably have the effect of acting as additional capital requirements with which banks must comply. Advanced approaches banks must maintain a fixed minimum supplementary leverage ratio (SLR), an unweighted capital requirement that is more stringent than the leverage ratio facing smaller banks because it incorporates off-balance sheet exposures. A Congressional Research Service (CRS) analysis of large holding companies' regulatory filings indicates that, currently, 19 large and complex U.S. bank or thrift holding companies are classified as advanced approaches banks. G-SIBs must meet fixed enhanced SLR (eSLR) requirements, which sets the SLR higher for these banks. In addition, the G-SIBs are subject to an additional risk-weighted capital surcharge (on top of other risk-weighted capital requirements that all banks must meet) of between 1% and 4.5% based on the systemic importance of the institution. Whether these requirements are appropriately calibrated is a debated issue. Proponents of recalibrating some of these capital requirements argue that those requirements set at a fixed number—including the CCB and eSLR—are inefficient, because they do not reflect varying levels of risk posed by individual banks. Recalibration proponents also argue that compiling with these requirements in addition to stress test requirements is unnecessarily burdensome for banks. Opponents of proposals to relax current capital requirements facing large and profitable banks assert that doing so needlessly pares back important safeguards against bank failures and systemic instability. In response to concerns that fixed requirements do not adequately account for risk differences between institutions, the Fed has issued two proposals for public comment that would link individual large banks' requirements with other risk measures. One proposal would make bank CCB requirements a function of their stress tests results, and the other proposal would link large banks' eSLR requirements with individual G-SIB systemic importance scores. The Fed estimates that the new CCB requirement would generally reduce the amount of capital large banks would have to hold, but that some G-SIBs would see their required capital levels increase. The Fed estimates that the new eSLR requirement would generally reduce the amount of capital held by G-SIB parent companies by $400 million and the amount held by insured depository subsidiaries by $121 billion. To legally operate as a bank and perform the relevant activities, an institution generally must have a charter granted by either the OCC at the federal level or a state-level authority. In addition, to engage in certain activities, the institution must have federal deposit insurance granted by the FDIC. Currently, these requirements raise a number of policy questions, including whether companies established primarily as financial technology companies should be able to receive a national bank charter, as has been offered by the OCC; and whether the application process and determinations made by the FDIC as they relate to institutions seeking a specific type of state charter, called an industrial loan company (ILC) charter, is overly restrictive. An institution that makes loans and takes deposits—the core activities of traditional commercial banking—must have a government issued charter. Numerous types of charters exist, including national bank charters; state bank charters; federal savings association charters, and state savings association charters (saving associations are also referred to as thrifts ). Each charter type determines what activities are permissible for the institution, what activities are restricted, and which agency will be the institution's primary federal regulator (see Table 1 ). One of the main rationales for this system is that it gives institutions with different business models and ownership arrangements the ability to choose a regulatory regime appropriately suited to the institution's business needs and risks. The differences between institution business models and the attendant regulations are numerous, varied, and beyond the scope of this report. The issues examined in this section arise from each charter's granting an institution the right to engage in certain banking related activities, and thus generating the potential benefits and risks of those activities. Broadly, these issues relate to questions over whether companies that differ from traditional banks should be allowed to engage in traditional banking activities given the types and magnitudes of benefits and risks the companies might present. Recent advances in technology, including the proliferation of available data and internet access, have altered the way financial activities are performed in many ways. These innovations in financial technology, or fintech, have created the opportunity for certain activities that have traditionally been the business of banks to instead be performed by technology-focused, nonbank companies. Lending and payment processing are prominent examples. This development has raised questions over how these fintech companies should be regulated, and the appropriate federal and state roles in that regulation. One possible, though contested, proposal for addressing a number of these questions would be to make an OCC national bank charter available to certain fintech companies. Many nonbank fintech companies performing bank-like activities are regulated largely at the state level. They may have to obtain lending licenses or register as money transmitters in every state they operate and may be subject to the consumer protection laws of that state, such as interest rate limits. Proponents of fintech companies argue that subjecting certain technology companies to 50 different state level regulatory regimes is unnecessarily burdensome and hinders companies that hope to achieve nationwide operations quickly using the internet. In addition, a degree of uncertainty surrounding the applicability of certain laws and regulations to certain fintech firms and activities has arisen. For example, whether federal preemption of state interest rate limits apply to loans made through a marketplace lender —that is, online-only lenders that exclusively use automated, algorithmic underwriting—but originated by a bank faces legal uncertainty due to certain court decisions, including Madden v Midlands . One possible avenue to ease the state-by-state regulatory burdens and resolve the uncertainties facing some fintech firms would be to allow those firms that perform bank-like activities to apply for and (provided they meet necessary requirements) to grant them national bank charters. First proposed in 2016 by then-Comptroller of the Currency Thomas Curry, and following subsequent examination of the issue and review of public comments, the OCC announced in July 2018 that it would consider "applications for special purpose bank charters from financial technology (fintech) companies that are engaged in the business of banking but do not take deposits." OCC argues that companies with such a charter would be explicitly subject to all laws and regulations (including those that preempt state law, a contentious issue addressed below) applicable to national banks. The OCC stated that fintech firms granted the charter "will be subject to the same high standards of safety and soundness and fairness that all federally chartered banks must meet," and also that the OCC "may need to account for differences in business models and activities, risks, and the inapplicability of certain laws resulting from the uninsured status of the bank." Thus, the argument goes, establishing a fintech charter would mean a new set of innovative companies would no longer face regulatory uncertainty and could safely and efficiently provide beneficial financial services, perhaps to populations and market-niches that banks with traditional cost structures do not find cost-effective to serve. Until the OCC actually grants such charters and fintech firms operate under the national bank regime for some amount of time, how well this policy fosters potential innovations and benefits while guarding against risks is the subject of debate. Proponents of the idea generally view the charter as a mechanism for freeing companies from what they assert is the unnecessarily onerous regulatory burden of being subject to numerous state regulatory regimes. They further argue that this would be achieved without overly relaxing regulations, as the companies would become subject to the OCC's national bank regulatory regime and its rulemaking, supervisory, and enforcement authorities. Opponents generally assert both that the OCC does not have the authority to charter these types of companies, as discussed below, and that doing so would inappropriately allow marketplace lenders to circumvent important state-level consumer protections. The OCC's assertion that it has the authority to grant such charters has been challenged. Shortly after the initial 2016 announcements that the OCC was examining the possibility of granting the charters, the Conference of State Bank Supervisors and the New York State Department of Financial Services sued the OCC to prevent it from issuing the charters on the grounds that it lacked the authority to do so. A federal district court dismissed the case after concluding that because the OCC had not yet issued charters to nonbanks, the plaintiffs (1) lacked standing to challenge the OCC's purported decision to move forward with chartering nonbanks, and (2) had alleged claims that were not ripe for adjudication. Subsequent to the OCC's July 2018 announcement, state regulators have again filed lawsuits. Industrial loan companies (ILCs) hold a particular type of charter offered by some states that generally allows ILCs to engage in certain banking activities. Depending on the state, those activities can include deposit-taking, but only if they are granted deposit insurance by the FDIC. Thus, ILCs that take deposits are state regulated with the FDIC acting as the primary federal regulator. Importantly, a parent company that owns an ILC that meets certain criteria is not necessarily considered a BHC for legal and regulatory purposes. This means ILC charters create an avenue for commercial firms (i.e., companies not primarily focused on the financial industry, such as manufacturers, retailers, or possibly technology companies) to own a bank. Nonfinancial parent companies of ILCs generally are not subject to Fed supervision and other regulations pursuant to the Bank Holding Company Act of 1956 (P.L. 84-511). A commercial firm may want to own a bank for a number of economic reasons. For example, an ILC can provide financing to the parent company's customers and clients and thus increase sales for the parent. In recent decades, household-name manufacturers have owned ILCs, including but not limited to General Motors, Toyota, Harley Davidson, and General Electric. However, while they can generate profits and potentially increase credit availability, ILCs pose a number of potential risks. The United States has historically adopted policies to generally separate commerce and banking, because allowing a single company to be involved in both activities could potentially result in a number of bad outcomes. A mixed organization's banking subsidiary could make decisions based on the interests of the larger organization, such as making overly risky loans to customers of a commerce subsidiary or providing funding to save a failing commerce subsidiary. Such conflicts of interest could threaten the safety and soundness of the bank. Relatedly, some have argued that having a federally insured bank within a commercial organization is an inappropriate expansion of federal banking safety nets (such as deposit insurance). Certain observers, including community banks, have concerns over whether purely commercial or purely banking organizations would be able to compete with combined organizations that could potentially use economies of scale and funding advantages to exercise market power. These arguments played a prominent role in the public debate that was sparked when Walmart and Home Depot made unsuccessful efforts to secure an ILC charter between 2005 and 2008. Amid this debate, the FDIC imposed a moratorium in 2006 on the acceptance, approval, or denial of ILC applications for deposit insurance while the agency reexamined its policies related to these companies. That moratorium ended in January 2008. Subsequently, concerns over ILCs led Congress to mandate another moratorium (this one lasting three years, ending in July 2013) on granting new ILCs deposit insurance in the Dodd-Frank Act. No consensus has been reached on the magnitude of these risks and validity of the concerns surrounding deposit-taking ILCs. Recently, two financial technology companies, Square and SoFi, have applied for ILC charters and renewed debates over ILCs. Even though the moratoriums on granting ILCs deposit insurance have expired, the FDIC has not approved any new ILC applications since the 2013 expiration. However, since becoming FDIC chairman in June 2018, Jelena McWilliams has made statements indicating that under her leadership the FDIC will again consider ILC applications. Given the interest in and debate surrounding this charter type, policymakers will likely examine questions over the extent to which ILCs create innovative sources of credit and financial services subject to appropriate safeguards or inadvisably allow commercial organizations to act as banks with federal safety nets while exempting them from certain bank regulation and supervision. In addition to regulation issues, market and economic conditions and trends continually affect the banking industry. This section analyzes such trends that may affect banks, including migration of financial activity from banks into nonbanks or the "shadow banking" system; increasing capabilities and market presence of financial technology or fintech; and a higher interest rate environment following a long period of extraordinarily low rates. Credit intermediation is a core banking activity and involves transforming short-term, liquid, safe liabilities into relatively long-term, illiquid, higher-risk assets. In the context of traditional banking, credit intermediation is performed by taking deposits from savers and using them to fund loans to borrowers. Nonbank institutions can also perform similar credit intermediation to banks—sometimes called shadow banking —using certain instruments such as money market mutual funds, short-term debt instruments, and securitized pools of loans. When illiquid assets are funded by liquid liabilities, an otherwise-solvent bank or nonbank might experience difficulty meeting short-term obligations without having to sell assets, possibly at "fire sale" prices. If depositors or other funding providers feel their money is not safe with an institution, many of them may withdraw their funds at the same time. Such a "run" could cause an institution to fail. Long-established government programs mitigate liquidity- and run-risk in the banking industry. The Federal Reserve is authorized to act as a "lender of last resort" for a bank experiencing liquidity problems, and the FDIC insures depositors against losses. Banks are also subject to prudential regulation—as discussed in the " Prudential Regulation " section. However, nonbank intermediation is performed without the government safety nets available to banks or the prudential regulation required of them. The lack of an explicit government safety net in shadow banking means that taxpayers are less explicitly or directly exposed to risk, but it also means that shadow banking may be more vulnerable to a panic that could trigger a financial crisis. Some argue that the increased regulatory burden placed on banks in response to the financial crisis—such as the changes in bank regulation mandated by Dodd-Frank or agreed to in Basel III—could result in a decreased role for banks in credit intermediation and an increased role for relatively lightly regulated nonbanks. Many contend the financial crisis demonstrated how risks to deposit-like financial instruments in the shadow banking sector—such as money market mutual funds and repurchase agreements—can create or exacerbate systemic distress. Money market mutual funds are deposit-like instruments that are managed with the goal of never losing principal and that investors can convert to cash on demand. Institutions can also access deposit-like funding by borrowing through short-term funding markets—such as by issuing commercial paper and entering repurchase agreements. These instruments can be continually rolled over as long as funding providers have confidence in the borrowers' solvency. During the crisis, all these instruments—which investors had previously viewed as safe and unlikely to suffer losses—experienced run-like events as funding providers withdrew from markets. Moreover, nonbanks can take on exposure to long-term loans through investing in mortgage-backed securities (MBS) or other asset-backed securities (ABS). During the crisis, as firms faced liquidity problems, the value of these assets decreased quickly, possibly in part as a result of fire sales. Since the crisis, many regulatory changes have been made related to certain money market, commercial paper, and repurchase agreement markets and practices. For example, in the United States, certain money market mutual funds now must have a floating net asset value . Among other benefits, this may signal to fund investors that a loss of principal is possible and thus reduce the likelihood that investors would "run" at the first sign of possible small losses. However, some observers are still concerned that shadow banking poses risks, because the funding of relatively long-term assets with relatively short-term liabilities will inherently introduce run-risk absent certain safeguards. As discussed above, f intech usually refers to technologies with the potential to alter the way certain financial services are performed. Banks are affected by technological developments in two ways: (1) they face choices over how much to invest in emerging technologies and to what extent they want to alter their business models in adopting technologies, and (2) they potentially face new competition from new technology-focused companies. Such technologies include online marketplace lending, crowdfunding, blockchain and distributed ledgers, and robo-advising, among many others. Certain financial innovations may create opportunities to improve social and economic outcomes, but there is also potential to create risks or unexpected financial losses. Potential benefits from fintech are greater efficiency in financial markets that creates lower prices and increased customer and small business access to financial services. These can be achieved if innovative technology replaces traditional processes that are outdated or inefficient. For example, automation may be able to replace employees, and digital technology can replace physical systems and infrastructure. Cost savings from removing inefficiencies may lead to reduced prices, making certain services affordable to new customers. Some customers who previously did not have access to services—due to such things as the lack of information about creditworthiness or geographic remoteness—could also potentially gain access. Increased accessibility may be especially beneficial to traditionally underserved groups, such as low-income, minority, and rural populations. Fintech could also create or increase risks. Many fintech products have only a brief history of operation, so it can be difficult to predict outcomes and assess risk. It is possible certain technologies may not in the end function as efficiently and accurately as intended. Also, the stated aim of a new technology is often to bring a product directly to consumers and eliminate a "middle-man." However, that middle-man could be an experienced financial institution or professional that can advise consumers on financial products and their risks. In these ways, fintech could increase the likelihood that consumers engage in a financial activity and take on risks that they do not fully understand. Policymakers debate whether (and which) innovations can be integrated into the financial system without additional regulatory or policy action. Technology in finance largely involves reducing the costs or time involved in providing existing products and services, and the existing regulatory structure was developed to address risks from these financial products and activities. Existing regulation may be able to accommodate new technologies while adequately protecting against risks. However, there are two other possibilities. One is that some regulations may be stifling beneficial innovation. Another is that existing regulation does not adequately address risks created by new technologies. Some observers argue that regulation could potentially impede the development and introduction of beneficial innovation. For example, companies incur costs to comply with regulations. In addition, companies are sometimes unsure how regulators will treat the innovation once it is brought to market. A potential solution being used in other countries is to establish a regulatory "sandbox" or "greenhouse" wherein companies that meet certain requirements work with regulators as products are brought to market under a less onerous regulatory framework. In the United States, the CFPB has recently introduced a sandbox wherein companies can experiment with disclosure forms. Some are concerned that existing regulations may not adequately address certain risks posed by new technologies. Regulatory arbitrage—conducting business in a way that circumvents unfavorable regulations—may be a concern in this area. Fintech potentially could provide an opportunity for companies to claim they are not subject to certain regulations because of a superficial difference between how they operate compared with traditional banks. Another group of issues posed by fintech relates to cybersecurity (for general issues related to cybersecurity, see the " Cybersecurity " section above). As financial activity increasingly uses digital technology, sensitive data are generated. Data can be used to accurately assess risks and ensure customers receive the best products and services. However, data can be stolen and used inappropriately, and there are concerns over privacy issues. This raises questions over ownership and control of the data—including the rights of consumers and the responsibilities of companies in accessing and using data—and whether companies that use and collect data face appropriate cybersecurity requirements. The Federal Reserve's monetary policy response to the financial crisis, the ensuing recession, and subsequent slow economic growth was to keep interest rates unusually low for an extraordinarily long time. It accomplished this in part using unprecedented monetary policy tools such as quantitative easing —large-scale asset purchases that significantly increased the size of the Federal Reserve's balance sheet. Recently, as economic conditions improved, the Federal Reserve took steps to normalize monetary policy such as raising its target interest rate and reducing the size of its balance sheet. A rising interest rate environment—especially following an extended period of unusually low rates achieved with unprecedented monetary policy tools—is an issue for banks because they are exposed to interest rate risk . A portion of bank assets have fixed interest rates with long terms until maturity, such as mortgages, and the rates of return on these assets do not increase as current market rates do. However, many bank liabilities are short term, such as deposits, and can be repriced quickly. So although certain interest revenue being collected by banks is slow to rise, the interest costs paid out by banks can rise quickly. In addition to putting stress on net income, rising interest rates can cause the market value of fixed-rate assets to fall. Finally, banks incur an opportunity cost when resources are tied up in long-term assets with low interest rates rather than being used to make new loans at higher interest rates. The magnitude of interest rate risks should not be overstated, as rising rates can potentially increase bank profitability if they result in a greater difference between long-term rates banks receive and short-term rates they pay—referred to as net interest margin . However, thus far into the Federal Reserve interest rate normalization process, this has not materialized. During 2018, the difference between long-term rates and short-term rates has generally decreased (known as a flattening of the yield curve ). Whatever changes may occur to various interest rates in the coming months and years, banks and regulators typically recognize the importance of managing interest rate risk, carefully examine the composition of bank balance sheets, and plan for different interest rate change scenarios. While banks are well-practiced at interest rate risk management through normal economic and monetary policy cycles, managing bank risk through a period of interest rate growth could be more challenging because rates have been so low for so long and achieved through unprecedented monetary policy tools. Because rates have been low for so long, many loans made in different interest rate environments that preceded the crisis have matured. Meanwhile, all new loans made in the past 10 years were made in a low interest rate environment. This presents challenges to banks seeking to hold a mix of loans with different rates. In addition, because the Federal Reserve has used new monetary policy tools and grown its balance sheet to unprecedented levels, accurately controlling the pace of interest rate growth may be challenging. 

 

 Report 2:
Colombia, one of the oldest democracies in the Western Hemisphere and the third most populous Latin American country, has endured a multisided civil conflict for more than five decades until President Juan Ma nuel Santos declared the conflict over in August 2017 at the end of a U.N.-monitored disarmament. According to the National Center for Historical Memory 2013 report, presented to the Colombian government as part of the peace process to end the fighting, some 220,000 Colombians died in the armed conflict through 2012, 81% of them civilians. The report also provided statistics quantifying the scale of the conflict, which has taken a huge toll on Colombian society: more than 23,000 selective assassinations between 1981 and 2012; internal displacement of more than 5 million Colombians due to land seizure and violence; 27,000 kidnappings between 1970 and 2010; and 11,000 deaths or amputees from anti-personnel land mines laid primarily by Colombia's main insurgent guerrilla group, the Revolutionary Armed Forces of Colombia (FARC). To date, more than 8 million Colombians, or roughly 15% of the population, have registered as conflict victims. Although the violence has scarred Colombia, the country has achieved a significant turnaround. Once considered a likely candidate to become a failed state, Colombia, over the past two decades, has overcome much of the violence that had clouded its future. For example, between 2000 and 2016, Colombia saw a 94% decrease in kidnappings and a 53% reduction in homicides (below 25 per 100,000 in 2016). Coupled with success in lowering violence, Colombia has opened its economy and promoted trade, investment, and growth. Colombia has become one of Latin America's most attractive locations for foreign direct investment. Yet, after steady growth over several years, Colombia's economy slowed to 3.1% growth in 2015 and declined to 1.7% in 2017. Many analysts identified Colombia's dependence on oil and other commodity exports as the primary cause. Between 2012 and 2016, the Colombian government held formal peace talks with the FARC, Colombia's largest guerrilla organization. Upon taking office for a second term in August 2014, President Santos declared peace, equality, and education as his top priorities, although achieving the peace agreement remained his major focus. In August 2016, the government and FARC negotiators announced they had concluded their talks and achieved a 300-page peace agreement. The accord was subsequently narrowly defeated in a popular referendum held in early October 2016, but was revised by the Santos government and agreed to by the FARC and then ratified by the Colombian Congress at the end of November 2016. The Colombian conflict predates the formal founding of the FARC in 1964, as the FARC had its beginnings in the peasant self-defense groups of the 1940s and 1950s. Colombian political life has long suffered from polarization and violence based on the significant disparities and inequalities suffered by landless peasants in the country's peripheral regions. In the late 19 th century and a large part of the 20 th century, the elite Liberal and Conservative parties dominated Colombian political life. Violence and competition between the parties erupted in a period of extreme violence in Colombia, known as La Violencia , set off in 1948 by the assassination of Liberal presidential candidate Jorge Gaitán. The violence continued for the next decade. After a brief military rule (1953-1958), the Liberal and Conservative parties agreed to a form of coalition governance, known as the National Front. Under the arrangement, the presidency of the country alternated between Conservatives and Liberals, each holding office in turn for four-year intervals. This form of government continued for 16 years (1958-1974). The power-sharing formula did not resolve the tension between the two historic parties, and many leftist, Marxist-inspired insurgencies took root in Colombia, including the FARC, launched in 1964, and the smaller National Liberation Army (ELN), which formed the following year. The FARC and ELN conducted kidnappings, committed serious human rights violations, and carried out a campaign of terrorist activities to pursue their goal of unseating the central government in Bogotá. Rightist paramilitary groups formed in the 1980s when wealthy ranchers and farmers, including drug traffickers, hired armed groups to protect them from the kidnapping and extortion plots of the FARC and ELN. In the 1990s, most of the paramilitary groups formed an umbrella organization, the United-Self Defense Forces of Colombia (AUC). The AUC massacred and assassinated suspected supporters of the insurgents and directly engaged the FARC and ELN in military battles. The Colombian military has long been accused of close collaboration with the AUC, accusations ranging from ignoring their activities to actively supporting them. Over time, the AUC became increasingly engaged in drug trafficking, and other illicit businesses. In the late 1990s and early 2000s, the U.S. government designated the FARC, ELN, and AUC as Foreign Terrorist Organizations (FTOs). The AUC was formally dissolved in a collective demobilization between 2003 and 2006 after many of its leaders stepped down. However, former paramilitaries joined armed groups (called criminal bands, or Bacrim, by the Colombian government) who continued to participate in the lucrative drug trade and commit other crimes and human rights abuses. When the FARC demobilized in 2017, other illegally armed groups began aggressive efforts to take control of former FARC territory and its criminal enterprises as FARC forces withdrew. (For more, see " The Current Security Environment ," below.) The inability of Colombia's two dominant parties to address the root causes of violence in the country led to the election of an independent, Álvaro Uribe, in the presidential contest of 2002. Uribe, who served two terms, came to office with promises to take on the violent leftist guerrillas, address the paramilitary problem, and combat illegal drug trafficking. During the 1990s, Colombia had become the region's—and the world's—largest producer of cocaine. Peace negotiations with the FARC under the prior administration of President Andrés Pastrana (1998-2002) had ended in failure; the FARC used a large demilitarized zone located in the central Meta department (see map, Figure 1 ) to regroup and strengthen itself. The central Colombian government granted the FARC this demilitarized zone, a traditional practice in Colombian peace negotiations, but the FARC used it to launch terror attacks, conduct operations, and increase the cultivation of coca and its processing, while failing to negotiate seriously. Many analysts, noting the FARC's strength throughout the country, feared that the Colombian state might fail and some Colombian citizens thought the FARC might at some point successfully take power. The FARC was then reportedly at the apogee of its strength, numbering an estimated 16,000 to 20,000 fighters under arms. This turmoil opened the way for the aggressive strategy advocated by Uribe. At President Uribe's August 2002 inauguration, the FARC showered the event with mortar fire, signaling the group's displeasure at the election of a hardliner, who believed a military victory over the Marxist rebels was possible. In his first term (2002-2006), President Uribe sought to shore up and expand the country's military, seeking to reverse the armed forces' losses by aggressively combating the FARC. He entered into peace negotiations with the AUC. President Pastrana had refused to negotiate with the rightist AUC, but Uribe promoted the process and urged the country to back a controversial Justice and Peace Law that went into effect in July 2005 and provided a framework for the AUC demobilization. By mid-2006, some 31,000 AUC paramilitary forces had demobilized. The AUC demobilization, combined with the stepped-up counternarcotics efforts of the Uribe administration and increased military victories against the FARC's irregular forces, helped to bring down violence, although a high level of human rights violations still plagued the country. Uribe became widely popular for the effectiveness of his security policies, a strategy he called "Democratic Security." Uribe's popular support was evident when Colombian voters approved a referendum to amend their constitution in 2005 to permit Uribe to run for a second term. Following his reelection in 2006, President Uribe continued to aggressively combat the FARC. For Uribe, 2008 was a critical year. In March 2008, the Colombian military bombed the camp of FARC's second-in-command, Raul Reyes (located inside Ecuador a short distance from the border), killing him and 25 others. Also in March, another of FARC's ruling seven-member secretariat was murdered by his security guard. In May, the FARC announced that their supreme leader and founder, Manuel Marulanda, had died of a heart attack. The near-simultaneous deaths of three of the seven most important FARC leaders were a significant blow to the organization. In July 2008, the Colombian government dramatically rescued 15 long-time FARC hostages, including three U.S. defense contractors who had been held captive since 2003 and Colombian senator and former presidential candidate Ingrid Bentancourt. The widely acclaimed, bloodless rescue further undermined FARC morale. Uribe's success and reputation, however, were marred by several scandals. They included the "parapolitics" scandal in 2006 that exposed links between illegal paramilitaries and politicians, especially prominent members of the national legislature. Subsequent scandals that came to light during Uribe's tenure included the "false positive" murders allegedly carried out by the military (primarily the Colombian Army) in which innocent civilians were executed and then dressed to look like guerilla fighters to increase the military's rebel body count. In 2009, the media revealed another scandal of illegal wiretapping and other surveillance by the government intelligence agency, the Department of Administrative Security (DAS), to discredit journalists, members of the judiciary, and political opponents of the Uribe government. (In early 2012, the tarnished national intelligence agency was replaced by Uribe's successor, Juan Manuel Santos.) Despite the controversies, President Uribe remained popular and his supporters urged him to run for a third term in 2010. Another referendum was proposed to alter the constitution to allow a third term; however, it was turned down by Colombia's Constitutional Court. Once it became clear that President Uribe was constitutionally ineligible to run again, Juan Manuel Santos of the pro-Uribe National Unity party (or Party of the U) quickly consolidated his preeminence in the 2010 presidential campaign. Santos, a centrist, who came from an elite family that once owned the country's largest newspaper, had served as Uribe's defense minister through 2009. In 2010, Santos campaigned on a continuation of the Uribe government's approach to security and its role encouraging free markets and economic opening, calling his reform policy "Democratic Prosperity." In the May 2010 presidential race, Santos took almost twice as many votes as his nearest competitor, Antanas Mockus of the centrist Green Party, but he did not win a majority. Santos won the June runoff with 69% of the vote. Santos's "national unity" ruling coalition formed during his campaign included the center-right National Unity and Conservative parties, the centrist Radical Change Party, and the center-left Liberal party. On August 7, 2010, President Santos said in his first inauguration speech that he planned to follow in the path of President Uribe, but that "the door to [peace] talks [with armed rebels] is not locked." The Santos government was determined to improve relations with Ecuador and Venezuela, which had become strained under Uribe. Santos sought to increase cooperation on cross-border coordination and counternarcotics. He attempted to reduce tensions with Venezuela that had become fraught under Uribe, who claimed that Venezuelan President Hugo Chávez had long harbored FARC and ELN forces. During his first two years in office, President Santos reorganized the executive branch and built on the market opening strategies of the Uribe administration and secured a free-trade agreement with the United States, Colombia's largest trade partner, which went into effect in May 2012. To address U.S. congressional concerns about labor relations in Colombia, including the issue of violence against labor union members, the United States and Colombia agreed to an "Action Plan Related to Labor Rights" (Labor Action Plan) in April 2011. Many of the steps prescribed by the plan were completed in 2011 while the U.S. Congress was considering the free trade agreement. Significantly, the Santos government maintained a vigorous security strategy and struck hard at the FARC's top leadership. In September 2010, the Colombian military killed the FARC's top military commander, Victor Julio Suárez (known as "Mono Jojoy"), in a bombing raid. In November 2011, the FARC's supreme leader, Guillermo Leon Saenz (aka "Alfonso Cano") was assassinated. He was replaced by Rodrigo Londoño Echeverri (known as "Timoleón Jiménez" or "Timochenko"), the group's current leader. While continuing the security strategy, the Santos administration began to re-orient the Colombian government's stance toward the internal armed conflict through a series of reforms. The first legislative reform that moved this new vision along, signed by President Santos in June 2011, was the Victims' and Land Restitution Law (Victims' Law), to provide comprehensive reparations to an estimated (at the time) 4 million to 5 million victims of the conflict. Reparations under the Victims' Law included monetary compensation, psycho-social support and other aid for victims, and the return of millions of hectares of stolen land to those displaced. The law was intended to process an estimated 360,000 land restitution cases. The government's implementation of this complex law began in early 2012. Between 2011 and 2016, there were more than 100,000 applications for restitution and 5,000 properties, or about 5%, were resolved by judges. The Victims' Law, while not a land reform measure, tackled issues of land distribution including the restitution of stolen property to displaced victims. Given the centrality of land issues to the rural peasant-based FARC, passage of the Victims' Law was a strong indicator that the Santos government shared its interest in addressing land and agrarian concerns. In June 2012, another government initiative—the Peace Framework Law, also known as the Legal Framework for Peace—was approved by the Colombian Congress, which signaled that congressional support for a peace process was growing. In August 2012, President Santos announced he had opened exploratory peace talks with the FARC and was ready to launch formal talks. The countries of Norway, Cuba, Venezuela, and Chile each held an international support role, with Norway and Cuba serving as peace talk hosts and "guarantors." Following the formal start in Norway, the actual negotiations began a month later in mid-November 2012 in Cuba, where the FARC-government talks continued until their conclusion in August 2016. In the midst of extended peace negotiations, Colombia's 2014 national elections presented a unique juncture for the country. During the elections, the opposition Centro Democrático (CD) party gained 20 seats in the Senate and 19 in the less powerful Chamber of Representatives, and its leader, former President Uribe, became a popular senator. His presence in the Senate challenged the new ruling coalition that backed President Santos. During his second-term inaugural address in August 2014, President Santos declared three pillars—peace, equality, and education—as his focus, yet his top priority was to conclude the peace negotiations with the FARC. In February 2015, the Obama Administration provided support to the peace talks by naming Bernard Aronson, a former U.S. assistant secretary of state for Inter-American Affairs, as the U.S. Special Envoy to the Colombian peace talks. Talks with the FARC concluded in August 2016. In early October, to the surprise of many, approval of the accord was narrowly defeated in a national plebiscite by less than a half percentage point of the votes cast, indicating a polarized electorate. Regardless, President Santos was awarded the Nobel Peace Prize in December 2016, in part demonstrating strong international support for the peace agreement. In response to the voters' criticisms, the Santos government and the FARC crafted a modified agreement, which they signed on November 24, 2016. Rather than presenting this agreement to a plebiscite, President Santos sent it directly to the Colombian Congress, where it was ratified on November 30, 2016. Although both chambers of Colombia's Congress approved the agreement unanimously, members of the opposition CD party criticized various provisions in the accord that they deemed inadequate and boycotted the vote. The peace process was recognized as the most significant achievement of the Santos presidency and lauded outside of Colombia and throughout the region. Over the course of two terms, the President's approval ratings rose and fell rather significantly. His crowning achievement, the accord negotiated over 50 rounds of talks, covered five substantive topics: rural development and agricultural reform; political participation by the FARC; an end to the conflict, including demobilization, disarmament and reintegration; a solution to illegal drug trafficking; and justice for victims. A sixth topic provided for mechanisms to implement and monitor the peace agreement. Colombians elected a new congress in March 2018 and a new president in June 2018. Because no presidential candidate won more than 50% of the vote on May 27, 2018, as required for a victory in the first round, a second-round runoff was held June 17 between the rightist candidate Iván Duque and the leftist candidate Gustavo Petro (see results for presidential contest, Figure 3 ). Duque was carried to victory with almost 54% of the vote. Runner-up Petro, a former mayor of Bogotá, a former Colombian Senator, and once a member of the M-19 guerilla insurgency, nevertheless did better than any leftist candidate in a presidential race in the past century; he won 8 million votes and nearly 42% of the votes cast. Around 4.2% were protest votes, signifying Colombian voters who cast blank ballots. Through alliance building, Duque achieved a functional majority or a "unity" government, which involved the Conservative Party, Santos's prior National Unity or Party of the U, joining the CD, although compromise was required to keep the two centrist parties in sync with the more conservative CD. In the new Congress, two extra seats, for the presidential and vice presidential runners up, became automatic seats in the Colombian Senate and House, due to a constitutional change in 2015, allowing presidential runner up Gustavo Petro to return to the Senate. The CD party, which gained seats in both houses in the March vote, won the majority in the Colombian Senate (see Figure 2 for seat breakouts by party). Duque, who was inaugurated on August 7, 2018, at the age of 42, was the youngest Colombian president elected in a century. He possessed limited experience in Colombian politics. Duque was partially educated in the United States and worked for at decade at the Inter-American Development Bank in Washington, DC. He was the handpicked candidate of former president Uribe, who vocally opposed many of Santos's policies. Disgruntled Colombians perceived Santos as an aloof president whose energy and political capital were expended accommodating an often-despised criminal group, the FARC. President Duque appeared to be technically oriented and interested in economic reform, presenting himself as a modernizer. During his campaign, Duque called for economic renewal and lower taxes, fighting crime, and building renewed confidence in the country's institutions through some reforms. On September 26, 2018, in a speech before the U.N. General Assembly, the new president outlined his policy objectives . Duque called for increasing legality, entrepreneurship, and fairness by (1) promoting peace; (2) combating drug trafficking and recognizing it as a global menace, and (3) fighting corruption, which he characterized as a threat to democracy. He also maintained that the humanitarian crisis in neighboring Venezuela, resulting in more than 1 million migrants fleeing to Colombia, was an emergency that threatened to destabilize the region. Duque proposed a leadership role for Colombia in denouncing the authoritarian government of President Nicolás Maduro and containing his government's damage. By late November 2018, 1.2 million Venezuelans already present in Colombia were putting increasing pressure on the government's finances, generating a burden estimated at nearly 0.5% of the country's gross domestic product (GDP). President Duque, along with his vice president, Marta Lucía Ramírez, who initially ran as the Conservative Party candidate in the first round, recommended that drug policy shift back to a stricter counterdrug approach rather than a model endorsed in the peace accord, which focuses on voluntary eradication and economic support to peasant farmers to transition away from illicit drug crops. Duque campaigned on returning to spraying coca crops with the herbicide glyphosate. This would reverse Colombia's decision in mid-2015 to end aerial spraying, which had been a central—albeit controversial—feature of U.S.-Colombian counter-drug cooperation for two decades. Colombians' concerns with corruption became particularly acute during the 2018 elections, as major scandals were revealed. Similar to many countries in the region, government officials, including Santos during his 2014 campaign for reelection and the opposition candidate during that campaign were accused of taking payoffs (bribes) from the Odebrecht firm, the Brazilian construction company that became embroiled in a region-wide corruption scandal. In December 2018, presidential runner up Gustavo Petro was accused of taking political contributions from Odebrecht in a video released by a CD senator, indicating that both the left and the right of the Colombian political spectrum has been tainted by corruption allegations. In June 2017, the U.S. Drug Enforcement Administration arrested Colombia's top anti-corruption official, Gustavo Moreno. In mid-September 2017, the former chief justice of Colombia's Supreme Court was arrested for his alleged role in a corruption scandal that involved other justices accused of taking bribes from Colombian congressmen, some with ties to illegal paramilitary groups. The series of corruption charges made against members of Colombia's judicial branch, politicians, and other officials made the issue a prominent one in Colombian politics and was the focus of a left-centrist candidate's campaign in the presidential contest. In late August 2018, an anti-corruption referendum was defeated by narrowly missing a high vote threshold by less than a half percentage point, although the actual vote favored all seven proposed changes on the ballot. President Duque endorsed the referendum and maintains he will seek to curb many of the abuses identified in the referendum through legislation that his administration will propose. The Duque Administration's first budget for 2019 presented in late October 2018 was linked to an unpopular tax reform that would expand a value-added tax to cover basic food and agricultural commodities (some 36 items in the basic basket of goods, such as eggs and rice, previously exempted). The 2019 budget totals $89.7 billion, providing the education, military and police, and health sectors with the biggest increases, and reducing funding for peace accord implementation. Duque's own Democratic Center party split with him on the value-added tax, which quickly sank his approval ratings from 53% in early September 2018 to a low of 27% in November 2018, among the lowest levels in the early part of a presidential mandate in recent Colombian history. Colombia's economy is the fourth largest in Latin America after Brazil, Mexico, and Argentina. The World Bank characterizes Colombia as an upper middle-income country, although its commodities-dependent economy has been hit by oil price declines and peso devaluation related to the erosion of fiscal revenue. Between 2010 and 2014, Colombia's economy grew at an average of more than 4%, but slowed to 3.1% GDP growth in 2015. In 2017, Colombia's GDP growth slowed further to 1.7%. Despite its relative economic stability, high poverty rates and inequality have contributed to social upheaval in Colombia for decades. The poverty rate in 2005 was slightly above 45%, but declined to below 27% in 2016. The issues of limited land ownership and high rural poverty rates remain a problem. According to a United Nations study published in 2011, 1.2% of the population owned 52% of the land, and data revealed in 2016 that about 49% of Colombians continued to work in the informal economy. Colombia is often described as a country bifurcated between metropolitan areas with a developed, middle-income economy, and some rural areas that are poor, conflict-ridden, and weakly governed. The fruits of the growing economy have not been shared equally with this ungoverned, largely rural periphery. Frequently these more remote areas are inhabited by ethnic minorities or other disadvantaged groups, such as Afro-Colombians, indigenous populations, or landless peasants and subsistence farmers, who are vulnerable to illicit economies due to few connections to the formal economy. The United States is Colombia's leading trade partner. Colombia accounts for a small percentage of U.S. trade (approximately 1%), ranking 22 nd among U.S. export markets and 27 th among foreign exporters to the United States in 2017. Colombia has secured free trade agreements with the European Union, Canada, and the United States, and with most nations in Latin America. Colombian officials have worked over the past decade to increase the attractiveness of investing in Colombia, and foreign direct investment (FDI) grew by 16% between 2015 and 2016. This investment increase came not only from the extractive industries, such as petroleum and mining, but also from such areas as agricultural products, transportation, and financial services. Promoting more equitable growth and ending the internal conflict were twin goals of the two-term Santos administration. Unemployment, which historically has been high at over 10%, fell below that double-digit mark during Santos's first term and remained at 9.2% in 2016 but rose slightly to an estimated 9.6% in 2018. Although Colombia is ranked highly for business-friendly practices and has a favorable regulatory environment that encourages trade across borders, it is still plagued by persistent corruption and an inability to effectively implement institutional reforms it has undertaken, particularly in regions where government presence is weak. According to the U.S. State Department in its analysis of national investment climates, Colombia has demonstrated a political commitment to create jobs, develop sound capital markets, and achieve a legal and regulatory system that meets international norms for transparency and consistency. Despite its macroeconomic stability, several issues remain, such as a still-complicated tax system, a high corporate tax burden, and continuing piracy and counterfeiting issues. Colombia's rural-sector protestors formed strikes and blockades beginning in 2013 with demands for long-term and integrated-agricultural reform in a country with one of the most unequal patterns of land ownership. In October and November 2018, Colombian secondary and university students protested in high numbers during six large mobilizations, taking place over 60 days, to demand more funding for education. The four-year peace talks between the FARC and the Santos administration started in Norway and moved to Cuba where negotiators worked through a six-point agenda during more than 50 rounds of talks that produced agreements on six major topics. The final topic—verification to enact the programs outlined in the final accord—all parties knew would be the most challenging, especially with a polarized public and many Colombians skeptical of whether the FARC would be held accountable for its violence and crimes during the years of conflict. Some analysts have estimated that to implement the programs required by the commitments in the accord to ensure stable post-conflict development may require 15 years and cost from $30 billion to $45 billion. The country faces steep challenges to underwrite the post-accord peace programs in an era of declining revenues. While progress has been uneven, some programs (those related to drug trafficking) had external pressure to move forward quickly and some considered urgent received "fast track" treatment to expedite their regulation by Congress. The revised peace accord that was approved by the Colombian Congress in late 2016 was granted fast track implementation by the Colombian Constitutional Court in a ruling on December 13, 2016, particularly applied to the FARC's disarmament and demobilization. However, in May 2017, a new ruling by the high court determined that all legislation related to the implementation of the accord needed to be fully debated rather than passed in an expedited fashion, which some analysts maintain started to slow the process of implementing the accord significantly. The Kroc Institute for International Peace Studies at the University of Notre Dame is responsible for monitoring and implementing the agreement. It issued two interim reports in November 2017 and August 2018. At the end of the last reporting period (June 2018), the Kroc Institute estimated that 63% of the 578 peace accord commitments have begun implementation. In relation to other peace accords it had studied, the Kroc Institute found that the implementation of Colombia's accord was on course as about average, although that progress took place prior to President Duque's election. The first provision undertaken was the demobilization of the FARC, monitored by a U.N. mission that was approved by the U.N. Security Council to verify implementation of the accords. U.N. monitors also emptied large arm caches identified by FARC leaders, seizing the contents of more than 750 of the reported nearly 1,000 caches by the middle of 2017. With the final disarmament, President Santos declared the conflict over in mid-August 2017. The U.S. State Department reported in its Country Reports on Terrorism 201 , that by September 25, 2017, the United Nations had verified the collection of 8,994 arms, 1.7 million rounds, and more than 40 tons of explosives. The report states that the Colombian government had accredited "roughly 11,000 ex-combatants for transition to civilian life." The FARC also revealed its hidden assets in September 2017, listing more than $330 million in mostly real estate investments. This announcement drew criticism from several analysts who note that the FARC assets are likely much greater. In July 2017, the U.N. Security Council voted to expand its mandate and launch a second mission for three years to verify the reintegration of FARC guerrillas into civil society beginning September 20, 2017. One of Colombia's greatest challenges continues to be ensuring security for ex-combatants and demobilized FARC. The FARC's reintegration into civil society is a charged topic because the FARC's efforts in the 1980s to start a political party, known as the Patriotic Union, or the UP by its Spanish acronym, resulted in more than 3,000 party members being killed by rightwing paramilitaries and others. As of the end of 2018, reportedly 85 FARC members and their close relatives had been killed. In addition to unmet government guarantees of security, the FARC also has criticized the government for not adequately preparing for the group's demobilization. According to observers, the government failed to provide basic resources to FARC gathered throughout the country in specially designated zones for disarmament and demobilization (later renamed reintegration zones). The demobilization areas or cantonments had been so little prepared in early 2017 that the FARC had in many cases to construct their own housing and locate food and other provisions. Reintegration of former combatants has proceeded slowly. The Constitutional Court's May 2017 ruling to restrict fast track, and controversy about the new court to try war crimes and other serious violations, the "Special Jurisdiction of Peace" led to further delays. Peace process advocates have cited limited attention to include ethnic Colombians, such as Afro-Colombian leaders and indigenous communities, into the accord's implementation, as required by the "ethnic chapter" of the peace accord. A U.N. deputy human rights official warned in October 2017 that after a successful demobilization it would be dangerous not to reintegrate FARC former combatants by providing them realistic options for income and delaying effective reintegration could undermine peace going forward. Under the peace accord, Territorially Focused Development Programs (PDETs in Spanish) are a tool for planning and managing a broad rural development process, with the aim of transforming170 municipalities (covering 16 subregions) most affected by the armed conflict. PDETs target those municipalities in Colombia with the highest number of displacements and those that have experienced the most killings, massacres, and forced disappearances. These marginal areas generally have experienced chronic poverty, high inequality, the presence of illicit crops such as coca, and low levels of local government institutional performance. Violence and forced displacements in some of the PDET municipalities increased in the last half of 2018. Colombia's Constitutional Court determined in October 2017 that over the next three presidential terms (until 2030), Colombia must follow the peace accord commitments negotiated by the Santos administration and approved by the Colombian Congress in 2016. The Special Jurisdiction of Peace, set up to adjudicate the most heinous crimes of Colombia's decades-long armed conflict, began to hear cases in July 2018. However, Colombians remain skeptical of its capacity. A key challenge is the case of a FARC leader and lead negotiator in the peace process, Jesús Santrich, alleged to have committed drug trafficking crimes in 2017 after the accord was ratified, who has been jailed. Colombia has confronted a complex security environment of armed groups: two violent leftist insurgencies, the FARC and the ELN, and groups that succeeded the AUC following its demobilization during the Uribe administration. The FARC, whittled down by the government's military campaign against it, continued to conduct a campaign of terrorist activities during peace negotiations with the government through mid-2015, but it imposed successive temporary unilateral cease-fires that significantly reduced violence levels. In August 2016, the FARC and the government concluded negotiations on a peace accord that was subsequently approved by Congress with modifications in November 2016. Authorities and some analysts maintain that since the peace accord was ratified, 5% to 10% of the FARC have become dissidents who reject the peace settlement, although other estimates suggest a higher percentage. These armed individuals remain a threat. As agreed in the peace accord, the demobilized rebels transitioned to a political party that became known as the Common Alternative Revolutionary Force (retaining the acronym FARC) in September 2017. On November 1, 2017, the FARC announced their party's presidential ticket: current FARC leader Rodrigo Londoño (aka Timochenko) for president and Imelda Daza for vice president. The FARC Party ran several candidates in congressional races but failed to win any additional congressional race for which it competed in the March 2018 legislative elections, so the automatic seats in Congress were the only ones that it filled. The ELN, like the FARC, became deeply involved in the drug trade and used extortion, kidnapping, and other criminal activities to fund itself. The ELN, with diminished resources and reduced offensive capability, according to government estimates, declined to fewer than 2,000 fighters, although some analysts maintain in 2018 the forces grew as high as 3,400, including former FARC who were recruited to join the ELN as the larger rebel group demobilized. In 2015, ELN leadership began exploratory peace talks with the Santos government in Ecuador, although the ELN continued to attack oil and transportation infrastructures and conduct kidnappings and extortions, at least periodically. Formal talks with the ELN finally opened in February 2017 in Quito, Ecuador. After the talks moved to Cuba in May 2018, at the request of Ecuador's President Lenín Moreno, several negotiating sessions took place. The ELN's central leadership, including Nicolás Rodríguez Bautista (aka "Gabino"), arrived in Cuba to continue the talks. However, President Duque in September 2018 suspended the talks and recalled the government negotiating team. The ELN is far more regionally oriented, decentralized, and nonhierarchical in its decisionmaking than the FARC. Late in 2018, a Colombian political online magazine claimed a meeting had been held two months earlier between FARC dissident groups and the ELN in Venezuela in which the parties discussed how to increase their coordination. On January 17, 2019, a car bomb attack at a National Police academy in southern Bogotá shattered illusions that Colombia's long internal conflict with insurgents was coming to an end. The bombing, allegedly carried out by an experienced ELN bomb maker, killed 20 police cadets and the bomber and injured more than 65 others. The ELN took responsibility for the attack in a statement published on January 21. Large demonstrations took place in Bogotá protesting the return of violence to Colombia's capital city. The Duque government ended peace talks with the ELN, which had been ongoing sporadically since 2017. The Duque government then requested extradition of the ELN's delegation of negotiators to the peace talks in Cuba on terrorism charges. The Cuban government, which condemned the bombing, responded that the protocols for the peace talks required that the negotiators be returned to Colombia without arrest. The Duque government has persisted in requesting the negotiators to be extradited. The AUC, the loosely affiliated national umbrella organization of paramilitaries, officially disbanded a decade ago. The organization was removed from the State Department's Foreign Terrorist Organizations list in July 2014. More than 31,000 AUC members demobilized between 2003 and 2006, and many AUC leaders stepped down. However, as noted, many former AUC paramilitaries continued their illicit activities or re-armed and joined criminal groups—known as Bacrim . Many observers view the Bacrim as successors to the paramilitaries, and the Colombian government has characterized these groups as the biggest threat to Colombia's security since 2011. The Bacrim do not appear to be motivated by the dream of defeating the national government, but they seek territorial control and appear to provide rudimentary justice in ungoverned parts of the country. In 2013, the criminal group Los Urabeños, launched in 2006, emerged as the dominant Bacrim. Over its lifetime, the group has been referred to as the Gaitanistas, the Clan Úsuga, and most recently El Clan del Golfo, growing to about 3,000 members by 2015. The Urabeños organization is heavily involved in cocaine trafficking as well as arms trafficking, money laundering, extortion, gold mining, human trafficking, and prostitution. Early leaders of the group, such as founder Daniel Rendón Herrera (alias "Don Mario") and his brother Feddy Rendón Herrera were designated drug kingpins under the U.S. Kingpin Act in 2009 and 2010, respectively. However, because these men had been part of the AUC peace process, they could not be extradited to the United States until they had served time and paid reparations. In June 2015, the Justice Department unsealed indictments against 17 alleged Urabeños members. The Colombian government's efforts to dismantle the Urabeños and interrupt its operations began to result in the capture of top leaders and gradually to disrupt its illicit activities. The Urabeños faced an intense enforcement campaign by the Colombian police and military, especially after the Urabeños reportedly advertised and paid rewards to its subcontracted assassins to murder Colombian police. In September 2017, the Urabeños top leader, Dairo Antonio Úsuga (alias "Otoniel"), requested terms of surrender from the Santos government after the arrest of his wife and the killing or arrest of siblings and co-leaders, but this offer was never formalized. Colombia captured a vast amount of cocaine, approximately 12 metric tons, linked to the the Urabeños in November 2017. Splinter groups of the large Colombian drug cartels of the 1980s and 1990s, such as the Medellin Cartel and Cali Cartel, have come and gone in Colombia, including the powerful transnational criminal organizations (TCOs) the Norte del Valle Cartel and Los Rastrajos. The U.S. Drug Enforcement Administration's 2018 National Drug Threat Assessment maintains "large-scale Colombian TCOs" work closely with Mexican and Central American TCOs to export large quantities of cocaine out of Colombia every year. Traditionally, the FARC and ELN had cooperated with Bacrim and other Colombian crime groups in defense of drug trafficking and other illicit activities despite the groups' ideological differences. Venezuela is a major transit corridor for Colombian cocaine. According to the State Department's 2018 International Narcotics Control Strategy Report , Venezuela's porous western border with Colombia, current economic crisis, weak judicial system, sporadic international drug control cooperation, and a permissive and corrupt environment make it a preferred trafficking route for illicit drugs. A May 2018 report by Insight Crime identified more than 120 high-level Venezuelan officials who have engaged in criminal activity. The report analyzes how the Venezuelan military, particularly the National Guard, has been involved in the drug trade since 2002 and colluded with other illegally armed groups. Another Bacrim, Los Rastrojos, reportedly controls important gasoline smuggling routes between Venezuela and Colombia in 2018. Similarly, in the past year, ELN guerrillas reportedly have moved from seeking safe haven in Venezuela to taking control of illicit gold mining areas near Venezuela's border with Guyana. Both the ELN, which is still engaged in armed conflict with the Colombian government, and its rival, the Popular Liberation Army (EPL), reportedly recruit Venezuelans to cultivate coca in Colombia. Human trafficking and sexual exploitation of Venezuelan migrants throughout Colombia is prevalent. Dissident FARC guerrillas are using border areas and other remote areas in the countryside to regroup and could eventually seek to consolidate into a more unified organization or coordinate with other criminal groups sheltering in Venezuela. The State Department's 2017 terrorism report published in April 2018 maintained that the number of terrorist incidents in Colombia—carried out by the FARC and ELN—decreased significantly, by 40%, over the already much-diminished level of 2016. ELN aggression included high-impact attacks, such as launching mortars at police stations and bombing pipelines, although the report also states that ELN demobilizations and surrenders have increased. The humanitarian crisis in Venezuela has set in motion a mass exodus of desperate migrants, who have come temporarily (or for extended stays) to Colombia. Although Venezuela has experienced hyperinflation (the highest in the world), a rapid contraction of its economy, and severe shortages of food and medicine, as of November 2018 Venezuelan President Nicolás Maduro has refused most international humanitarian assistance. Based on estimates from the U.N. High Commissioner for Refugees (UNHCR), as of November 2018, more than 3 million Venezuelans were living outside Venezuela; of these, an estimated 2.3 million left after 2015. As conditions in Venezuela have continued to deteriorate, increasing numbers of Venezuelans have left the country. Neighboring countries, particularly Colombia, are straining to absorb a migrant population that is often malnourished and in poor health. The spread of previously eradicated diseases, such as measles, is also a major regional concern. In January 2019, the Trump Administration announced backing for the president of the Venezuelan National Assembly, Juan Guaidó, as interim president of Venezuela. The Trump Administration has called for Maduro's departure, and Colombia joined many other countries in Latin America and Europe to recognize Guaidó. U.S. Secretary of State Michael Pompeo announced that the United States was prepared to provide $20 million in humanitarian assistance to the people of Venezuela. Colombia joined 11 countries in the Lima Group that declared on February 4, 2019, their desire to hasten a return to democracy in Venezuela by working with Guaidó for a peaceful transition without the use of force. Colombia's multisided internal conflict over the last half century generated a lengthy record of human rights abuses. Although it is widely recognized that Colombia's efforts to reduce violence, combat drug trafficking and terrorism, and strengthen the economy have met with success, many nongovernmental organizations (NGOs) and human rights groups continue to report significant human rights violations, including violence targeting noncombatants, that involves killings, torture, kidnappings, disappearances, forced displacements, forced recruitments, massacres, and sexual attacks. The Center for Historical Memory report issued to the Colombian government in July 2013 traces those responsible for human rights violations to the guerrillas (the FARC and ELN), the AUC paramilitaries and successor paramilitary groups, and the Colombian security forces. In analyzing nearly 2,000 massacres between 1980 and 2012 documented in the center's database, the report maintains that 58.9% were committed by paramilitaries, 17.3% by guerrillas, and 7.9% by public security forces. According to the U.S. State Department's annual report on human rights covering 2017, Colombia's most serious human rights abuses centered on extrajudicial and unlawful killings; torture and detentions; rape and sexual crimes. In addition to the State Department, numerous sources report regularly on human rights conditions in Colombia. (See Appendix .) Colombia continues to experience murders and threats of violence against journalists, human rights defenders, labor union members, social activists such as land rights leaders, and others. Crimes of violence against women, children, Afro-Colombian and indigenous leaders, and other vulnerable groups continue at high rates. In December 2018, the U.N. special rapporteur on human rights defenders came out with strong criticism of heightened murders of human rights defenders, which he maintained were committed by hitmen paid no more than $100 per murder, according to reports he heard from activists and other community members whom he met with during a trip to Colombia. These ongoing issues reflect constraints of the Colombian judicial system to effectively prosecute crimes and overcome impunity. For many years, human rights organizations have raised concerns about extrajudicial executions committed by Colombian security forces, particularly the military. In 2008, it was revealed that several young men from the impoverished community of Soacha—who had been lured allegedly by military personnel from their homes to another part of the country with the promise of employment—had been executed. When discovered, the Soacha murder victims had been disguised as guerrilla fighters to inflate military claims of enemy body counts, resulting in the term false positives . Following an investigation into the Soacha murders, the military quickly fired 27 soldiers and officers, including three generals, and the army's commander resigned. The Colombian prosecutor general's criminal investigations of soldiers and officers who allegedly participated in the Soacha executions have proceeded quite slowly. Some 48 of the military members eventually charged with involvement in the Soacha cases were released due to the expiration of the statute of limitations. Whereas some soldiers have received long sentences, few sergeants or colonels have been successfully prosecuted. In 2009, the false positive phenomenon was investigated by the U.N.'s Special Rapporteur on Extrajudicial Executions, who issued a report that concluded with no finding that such killings were a result of an official government policy. However, the Special Rapporteur did find, "the sheer number of cases, their geographic spread, and the diversity of military units implicated, indicate that these killings were carried out in a more or less systematic fashion by significant elements within the military." The majority of the cases took place between 2004 and 2008, when U.S. assistance to Colombia peaked. In recent years, the number of new alleged false positive cases declined steeply, but human rights NGOs still reported a few cases in 2012 through 2015. To address the military's human rights violations, the Santos administration proposed a change to policy that did not prevail. This reform was a constitutional change to expand the jurisdiction of military courts and, it was approved by the Colombian Congress in late December 2012 by a wide margin despite controversy. Human rights groups criticized the legislation's shift in the jurisdiction over serious human rights crimes allegedly committed by Colombia's public security forces from the civilian to the military justice system. In its review of the constitutional amendment, the Colombian Constitutional Court struck down the law over procedural issues in October 2013. Human Rights Watch in a 2015 report on the false positive cases noted that prosecutors in the Human Rights Unit of the Prosecutor General's Office conducted investigations into more than 3,000 false positive homicide cases allegedly committed by army personnel that resulted in about 800 convictions, mostly of lower-ranking soldiers. Only a few of those convictions involved former commanders of battalions or other tactical units, and none of the investigations of 16 active and retired army generals had produced charges. In 2016, the prosecutions against generals accused of responsibility for false positives continued, although a few were closed and 12 remained under investigation at year's end. Additionally, in October 2016, the Colombian prosecutor general indicted Santiago Uribe, the brother of former President Uribe, on charges of murder and association to commit crimes for his alleged role in the paramilitary group "The 12 Apostols" in the 1990s. The State Department human rights report covering 2017, maintains that during the year through July, four new cases involving "aggravated homicide" committed by security forces and 11 new convictions were reached for "simple homicide" by security force members. Although estimates diverge, the number of human rights defenders murdered in 2016 totaled 80 and another 51 in the first half of 2017, according to Somos Defensores ("We are Defenders"), a Colombian NGO that tracks violence against defenders and is cited by the State Department. Some groups, such as the Colombian think tank, Indepaz, say the numbers are higher, up to 117 murders in 2016. In the two years since the approval of the 2016 peace accord, social leaders, ethnic community leaders, and human rights defenders have suffered from continued high levels of violence. Human rights organizations cite the murders of more than 100 activists in 2017 and in 2018. Of the 109 human rights and civil society activists killed in 2018 through November, some were leaders of efforts to implement the 2016 peace accord. For instance, 13 social leaders were assassinated in the southwest department of Cauca in the first six months of the year, a department in Colombia with the fourth largest area devoted to coca cultivation in the country and host to several peace accord programs associated with rural development, including voluntary eradication of drug crops. Few, if any, of those accused of making threats and ordering or carrying out assassinations have been prosecuted. According to these activists, perpetrators still have little to fear of legal consequences. Since early 2012, violence against land rights activists has risen sharply with the start of implementation of the Victims' Law that authorized the return of stolen land. A September 2013 report by Human Rights Watch pointing to the rise in violence against land activists and claimants maintained that the environment had turned so threatening that claimants who had received land judgments were too frightened to return, and the government had received more than 500 serious threats against claimants in less than 18 months. According to Human Rights Watch, many of the threats and killings have been conducted by paramilitary-influenced Bacrim, although they may be operating at the behest of third-party "landowners," who are trying to protect their land from seizure. For more than a decade, the Colombian government tried to suppress violence against groups facing extraordinary risk through the National Protection Unit (UPN) programs. Colombia's UPN provides protection measures, such as body guards and protective gear, to individuals in at-risk groups, including human rights defenders, journalists, trade unionists, and others. However, according to international and Colombian human rights groups, the UPN has been plagued by corruption issues and has inadequately supported the prosecution of those responsible for attacks. According to the State Department's Report on Human Rights Practices covering 2017, the UPN protected roughly 6,067 at-risk individuals, including 575 human rights activists, with a budget of $150 million. Journalists, a group that has traditionally received protection measures from the UPN, continue to operate in a dangerous environment in Colombia. According to the Committee to Protect Journalists (CPJ), 47 journalists have been killed in work-related circumstances since 1992. Three Ecuadorian journalists were killed by a FARC dissident group close to the border of Ecuador in 2018, leading to the end of the Colombian government's peace talks with the ELN in Ecuador and their subsequent move to Cuba. To help monitor and verify that human rights were respected throughout implementation of the peace accord, the government formally renewed the mandate of the U.N.'s High Commissioner of Human Rights in 2016 for three years. The issue of violence against the labor movement in Colombia has sparked controversy and debate for years. Many human rights groups and labor advocates have maintained that Colombia's poor record on protecting its trade union members and leaders from violence is one reason to avoid closer trade relations with Colombia. The U.S.-Colombia Free Trade Agreement (also known as the U.S.-Colombia Trade Promotion Agreement) could not be enacted without addressing the deep concern of many Members of Congress that Colombia must enforce basic labor standards and especially measures to mitigate the alleged violence against trade union members and bring perpetrators of such violence to justice. In April 2011, the United States and Colombia agreed to an "Action Plan Related to Labor Rights" (the Labor Action Plan, LAP), which contained 37 measures that Colombia would implement to address violence, impunity, and workers' rights protection. Before the U.S.-Colombia Free Trade Agreement entered into force in April 2012, the U.S. Trade Representative determined that Colombia had met all the important milestones in the LAP to date. Despite the programs launched and measures taken to implement the LAP, human rights and labor organizations claim that violence targeting labor union members continues. (Some analysts continue to debate whether labor activists are being targeted because of their union activities or for other reasons.) The Colombian government has acknowledged that violence and threats continue, but points to success in reducing violence generally and the number of homicides of labor unionists specifically. Violence levels in general are high in Colombia, but have steadily been decreasing. According to the data reported by the U.N. Office on Drugs and Crime (UNODC) in its annual homicide report, rates have decreased dramatically since 2002, when the homicide rate was at 68.9 per 100,000. The Colombian Ministry of Defense reported in 2016 that the homicide rate had declined to 24.4 per 100,000. In this context of an overall steady decline in homicides, the number of labor union killings has also declined. For many years, the government and the leading NGO source that tabulates these crimes did not agree on the number of labor union murders because they used different methodologies. Both sources recorded a decline, but the government generally saw a steeper decline. According to the Colombian labor rights NGO and think tank, the National Labor School ( Escuela Nacional Sindical , ENS), there has been a significant decline from 191 labor union murders in 2001 to 20 reported in 2012. In 2017, through the month of August the ENS reported 14 labor murders. Of the cases covering homicides between January 2011 and August 2017, 162 homicide cases in which victims were labor union members, were 409 convictions, 31 for cases after 2011 and 378 for cases before 2011. In addition, labor advocates note that tracking homicides does not capture the climate of intimidation that Colombian labor unions face. In addition to lethal attacks, trade union members encounter increased death threats, arbitrary detention, and other types of harassment. Measures to strengthen the judicial system to combat impunity for such crimes are also part of the Labor Action Plan. Nevertheless, many analysts maintain there remains a large backlog of cases yet to be investigated involving violent crimes against union members. The internal conflict has been the major cause of a massive displacement of the civilian population that has many societal consequences, including implications for Colombia's poverty levels and stability. Colombia has one of the largest populations of internally displaced persons (IDPs) in the world. Most estimates place the total at more than 7 million IDPs, or more than 10% of Colombia's estimated population of 49 million. This number of Colombians, forcibly displaced and impoverished as a result of the armed conflict, continues to grow and has been described by many observers as a humanitarian crisis. Indigenous and Afro-Colombian people make up an estimated 15%-22% of the Colombian population. They are, however, disproportionately represented among those displaced. The leading Colombian NGO that monitors displacement, Consultancy for Human Rights and Displacement (CODHES), reports that 36% of the victims of forced displacement nationwide in 2012 came from the country's Pacific region where Afro-Colombian and indigenous people predominate. The Pacific region has marginal economic development as a result of weak central government presence and societal discrimination. (Some 84% of the land in the Pacific region is subject to collective-title rights granted to Afro-Colombian and indigenous communities. ) Illegal armed groups are active in usurping land in this region, which is valued for its proximity to a major port and drug trafficking routes, and the Afro- and indigenous communities are also caught in the middle of skirmishes between illegal groups and Colombian security forces. IDPs suffer stigma and poverty and are often subject to abuse and exploitation. In addition to the disproportionate representation of Colombia's ethnic communities among the displaced, other vulnerable populations, including women and children, have been disproportionally affected. Women, who make up more than half of the displaced population in Colombia, can become targets for sexual harassment, violence, and human trafficking. Displacement is driven by a number of factors, most frequently in more remote regions of the country where armed groups compete and seek to control territory or where they confront Colombian security forces. Violence that uproots people includes threatened or actual child recruitment or other forced recruitment by illegal armed groups, as well as physical, psychological, and sexual violence. Other contributing factors reported by NGOs include counternarcotics measures such as aerial spraying, illegal mining, and large-scale economic projects in rural areas. Inter-urban displacement is a growing phenomenon in cities such as Buenaventura and Medellin, which often results from violence and threats by organized crime groups. The Victims' Law of 2011, which began to be implemented in 2012, is the major piece of legislation to redress Colombian displacement victims with the return of their stolen land. The historic law provides restitution of land to those IDPs who were displaced since January 1, 1991. The law aims to return land to as many as 360,000 families (impacting up to 1.5 million people) who had their land stolen. The government notes that some 50% of the land to be restituted has the presence of land mines and that the presence of illegally armed groups in areas where victims have presented their applications for land restitution has slowed implementation of the law. Between 2011 and 2016, 100,000 applications for land restitution were filed and approximately 5,000 properties (roughly 5% of applications) were successfully returned following judgements on the cases. With the international support from U.S. Agency for International Development (USAID) and other donors, a Victims Unit was established to coordinate the range of services for victims, including financial compensation and psychosocial services, provided by a host of government agencies. The 2011 Victims' Law is considered a model and particularly the implementation of a Victims' registry, which was supported by USAID. Through its Victims Unit, the Colombian government had provided financial reparations to over 800,000 victims and psychosocial support to 700,000 as of October 2018. The Global Report on Internal Displacement from the Internal Displacement Monitoring Centre (IDMC) reported, however, displacement inside Colombia continued with more than 171,000 internally displaced in 2016. As the political crisis in Venezuela has grown, a wave of refugees and migrants have come across the border into Colombia reversing an earlier trend. Venezuelans were fleeing political instability and economic turmoil in Colombia's once-wealthy neighboring nation. Venezuela's economic crisis worsened throughout 2018, prompting a sharp increase in migrants seeking to escape into Colombia. In response to the growing flood of Venezuelans, former President Santos initially announced that he would impose stricter migratory controls and deploy thousands of new security personnel along the frontier. Nevertheless, he acknowledged that Venezuela had once served as a vital escape valve for Colombian refugees fleeing their half century internal conflict, for which he was grateful. Colombia shares long borders with neighboring countries, and some of these border areas have been described as porous to illegal armed groups that threaten regional security. Colombia has a 1,370-mile border with Venezuela, approximately 1,000-mile borders with both Peru and Brazil, and shorter borders with Ecuador and Panama. Much of the territory is remote and rugged and suffers from inconsistent state presence. Although all of Colombia's borders have been problematic and subject to spillover effects from Colombia's armed conflict, the most affected are Venezuela, Ecuador, and Panama. Over the years, Colombia's relations with Venezuela and Ecuador have been strained by Colombia's counterinsurgency operations, including cross-border military activity. The FARC and ELN insurgents have been present in shared-border regions and in some cases the insurgent groups used the neighboring countries to rest, resupply, and shelter. Former President Uribe accused the former Venezuelan government of Hugo Chávez of harboring the FARC and ELN and maintained that he had evidence of FARC financing the 2006 political campaign of Ecuador's leftist President Rafael Correa. Relations between Ecuador and Colombia remained tense following the Colombian military bombardment of a FARC camp inside Ecuador in March 2008. Ecuador severed diplomatic relations with Colombia for 33 months. Also in 2008, Ecuador filed a suit against Colombia in the International Court of Justice (ICJ), claiming damages to Ecuadorian residents affected by spray drift from Colombia's aerial eradication of drug crops. In September 2013, Colombia reached an out-of-court settlement awarding Ecuador $15 million. Once in office, President Santos reestablished diplomatic ties with both countries and in his first term (2010-2014) cooperation greatly increased between Colombia and Venezuela on border and security issues and with Ecuador's Correa. However, concerns about Venezuelan links to the FARC and the continued use of Venezuela by the FARC and ELN as a safe haven to make incursions into Colombia remained an irritant in Colombian-Venezuelan relations. Nevertheless, the Venezuelan and Colombian governments committed to jointly combat narcotics trafficking and illegal armed group activities along the porous Venezuelan-Colombian border and Venezuela remained a supporting government of the FARC-government peace talks (along with Chile, Norway, and Cuba) through 2016, even after former President Chávez died in office in March 2013. Ecuador's government hosted exploratory talks between the ELN and the Santos government beginning in 2015, which became formal talks hosted in Quito in February 2017, although Ecuador's president requested that the talks move to Cuba in May 2018, due to a spate of border violence that could have been related to the ELN. For many years, the region in Panama that borders Colombia, the Darien, was host to a permanent presence of FARC soldiers who used the remote area for rest and resupply as well to transit drugs north. By 2015, according to the State Department, the FARC was no longer maintaining a permanent militarized presence in Panamanian territory, in part due to effective approaches taken by Panama's National Border Service in coordination with Colombia. Nevertheless, the remote Darien region still faces challenges from smaller drug trafficking organizations and criminal groups such as Bacrim and experiences problems with human smuggling with counterterrorism implications. When Colombia hosted the Sixth Summit of the Americas in April 2012, President Obama and President Santos announced a new joint endeavor, the Action Plan on Regional Security Cooperation. This joint effort, built on ongoing security cooperation, addresses hemispheric challenges, such as combating transnational organized crime, bolstering counternarcotics, strengthening institutions, and fostering resilient communities. The Action Plan focuses on capacity building for security personnel in Central America and the Caribbean by Colombian security forces (both Colombian military and police). To implement the plan, Colombia undertook several hundred activities in cooperation with Panama, Costa Rica, El Salvador, Honduras, Guatemala and the Dominican Republic, and between 2013 and 2017 trained almost 17,000 individuals (see Figure 4 ). The Colombian government notes that this program grew dramatically from 34 executed activities in 2013 to 441 activities planned for 2018. Colombia has increasingly trained military and police from other countries both under this partnership and other arrangements, including countries across the globe. According to the Colombian Ministry of Defense, around 80% of those trained were from Mexico, Central America, and the Caribbean. U.S. and Colombian officials maintain that the broader effort is designed to export Colombian expertise in combating crime and terrorism while promoting the rule of law and greater bilateral and multilateral law enforcement cooperation. Critics of the effort to "export Colombian security successes" maintain that human rights concerns have not been adequately addressed. Some observers question the portion of these activities that are funded by the U.S. government and want to see more transparency. In one analysis of the training, a majority of the training was provided by Colombian National Police rather than the Colombian Army, in such areas as ground, air, maritime, and river interdiction; police testimony; explosives; intelligence operations; psychological operations; and Comando JUNGLA, Colombia's elite counternarcotics police program. Other analysts praise the Colombian training and maintain that U.S. assistance provided in this way has helped to improve, professionalize, and expand the Colombian military, making it the region's second largest. As that highly trained military shifts from combating the insurgency and the Colombian National Police take the dominant role in guaranteeing domestic security, Colombia may play a greater role in regional security and even in coalition efforts internationally. In September 2017, President Trump announced that he had considered designating Colombia in noncompliance with U.S. counternarcotics requirements, but noted that he had not proceeded with the step in part because of Colombian training efforts to assist others in the region with combating narcotics and related crime. Colombia is a key U.S. ally in the region. With diplomatic relations that began in the 19 th century following Colombia's independence from Spain, the countries have enjoyed close and strong ties. Because of Colombia's prominence in the production of illegal drugs, the United States and Colombia forged a close partnership over the past 16 years. Focused initially on counternarcotics, and later counterterrorism, a program called Plan Colombia laid the foundation for a strategic partnership that has broadened to include sustainable development, human rights, trade, regional security, and many other areas of cooperation. Between FY2000 and FY2016, the U.S. Congress appropriated more than $10 billion in assistance from U.S. State Department and Department of Defense (DOD) accounts to carry out Plan Colombia and its follow-on strategies. During this time, Colombia made notable progress combating drug trafficking and terrorist activities and reestablishing government control over much of its territory. Its economic and social policies have reduced the poverty rate and its security policies have lowered the homicide rate. Counternarcotics policy has been the defining issue in U.S.-Colombian relations since the 1980s because of Colombia's preeminence as a source country for illicit drugs. Peru and Bolivia were the main global producers of cocaine in the 1980s and early 1990s. However, successful efforts there in reducing supply pushed cocaine production from those countries to Colombia, which soon surpassed both its Andean neighbors. The FARC and other armed groups in the country financed themselves primarily through narcotics trafficking, and that lucrative illicit trade provided the gasoline for the decades-long internal armed conflict at least since the 1990s. Colombia emerged to dominate the cocaine trade by the late 1990s. National concern about the crack cocaine epidemic and extensive drug use in the United States led to greater concern with Colombia as a source. As Colombia became the largest producer of coca leaf and the largest exporter of finished cocaine, heroin produced from Colombian-grown poppies was supplying a growing proportion of the U.S. market. Alarm over the volumes of heroin and cocaine being exported to the United States was a driving force behind U.S. support for Plan Colombia at its inception. The evolution of Plan Colombia took place under changing leadership and changing conditions in both the United States and Colombia. Plan Colombia was followed by successor strategies such as the National Consolidation Plan, described below, and U.S.-Colombia policy has reached a new phase anticipating post-conflict Colombia. Announced in 1999, Plan Colombia originally was a six-year strategy to end the country's decades-long armed conflict, eliminate drug trafficking, and promote development. The counternarcotics and security strategy was developed by the government of President Andrés Pastrana in consultation with U.S. officials. Colombia and its allies in the United States realized that for the nation to gain control of drug trafficking required a stronger security presence, the rebuilding of institutions, and extending state presence where it was weak or nonexistent. Initially, the U.S. policy focus was on programs to reduce the production of illicit drugs. U.S. support to Plan Colombia consisted of training and equipping counternarcotics battalions in the Colombian Army and specialized units of the Colombian National Police, drug eradication programs, alternative development, and other supply reduction programs. The original 1999 plan had a goal to reduce "the cultivation, processing, and distribution of narcotics by 50%" over the plan's six-year timeframe. The means to achieve this ambitious goal were a special focus on eradication and alternative development; strengthening, equipping, and professionalizing the Colombian Armed Forces and the police; strengthening the judiciary; and fighting corruption. Other objectives were to protect citizens from violence, promote human rights, bolster the economy, and improve governance. U.S. officials expressed their support for the program by emphasizing its counterdrug elements (including interdiction). The focus on counternarcotics was the basis for building bipartisan support to fund the program in the U.S. Congress because some Members of Congress were leery of involvement in fighting a counterinsurgency, which they likened to the "slippery slope" of the war in Vietnam. President George W. Bush came to office in 2001 and oversaw some changes to Plan Colombia. The primary vehicle for providing U.S. support to Plan Colombia was the Andean Counterdrug Initiative, which was included in foreign operations appropriations. The Bush Administration requested new flexibility so that U.S.-provided assistance would back a "unified campaign against narcotics trafficking, terrorist activities, and other threats to [Colombia's] national security" due to the breakdown of peace talks between the FARC and the Pastrana government in February 2002. Congress granted this request for a unified campaign to fight drug trafficking and terrorist organizations as Members of Congress came to realize how deeply intertwined the activities of Colombia's terrorist groups were with the illicit drug trade that funded them. However, Congress prohibited U.S. personnel from directly participating in combat missions. Congress placed a legislative cap on the number of U.S. military and civilian contractor personnel who could be stationed in Colombia, although the cap was adjusted to meet needs over time. The current limit (first specified in the FY2015 National Defense Authorization Act, as amended) caps total military personnel at 800 and civilian contractors at 600, although numbers deployed have been far below the 1,400-person cap for years and now total fewer than 200. President Uribe (2002-2010) embraced Plan Colombia with an aggressive strategy toward the insurgent forces that prioritized citizen security. His Democratic Security Policy, implemented first in a military campaign called Plan Patriota, relied on the military to push FARC forces away from the major cities to remote rural areas and the borderlands. Like his predecessor, President Pastrana, Uribe continued to expand the Colombian military and police. He enhanced the intelligence capacity, professionalization, and coordination of the forces, in part with training provided by U.S. forces. His strategy resulted in expanded state control over national territory and a significant reduction in kidnappings, terrorist attacks, and homicides. In 2007, the Uribe administration announced a shift to a "Policy of Consolidation of Democratic Security." The new doctrine was based on a "whole-of-government" approach to consolidate state presence in marginal areas that were historically neglected—vulnerable to drug crop cultivation, violence, and control by illegal armed groups. Called a strategic leap forward by then-Defense Minister Juan Manuel Santos, in 2009 the new strategy came to be called the National Consolidation Plan (see below). Colombian support for Plan Colombia and for the nation's security program grew under Uribe's leadership. President Uribe levied a "wealth tax" to fund Colombia's security efforts, taxing the wealthiest taxpayers to fund growing defense and security expenditures. Overall U.S. expenditures on Plan Colombia were only a modest portion of what Colombians spent on their own security. By one 2009 estimate, U.S. expenditures were not more than 10% of what Colombians invested in their total security costs. In 2000, Colombia devoted less than 2% of its GDP to military and police expenditures and in 2010 that investment had grown to more than 4% of GDP. One assessment notes "in the end there is no substitute for host country dedication and funding" to turn around a security crisis such as Colombia faced at the beginning of the millennium. In 2008, congressional support for Plan Colombia and its successor programs also shifted. Some Members of Congress believed that the balance of programming was too heavily weighted toward security. Prior to 2008, the emphasis had been on "hard side" security assistance (to the military and police) compared with "soft side" traditional development and rule of law programs. Members debated if the roughly 75%/25% mix should be realigned. Since FY2008, Congress has reduced the proportion of assistance for security-related programs and increased the proportion for economic and social aid. As Colombia's security situation improved and Colombia's economy recovered, the United States also began turning over to Colombians operational and financial responsibility for efforts formerly funded by the U.S. government. The Colombian government "nationalized" the training, equipping, and support for Colombian military programs, such as the counterdrug brigade, Colombian Army aviation, and the air bridge denial program. U.S. funding overall began to decline. The nationalization efforts were not intended to end U.S. assistance, but rather to gradually reduce it to pre-Plan Colombia levels, adjusted for inflation. A key goal of Plan Colombia was to reduce the supply of illegal drugs produced and exported by Colombia but the goals became broader over time. Bipartisan support for the policy existed through three U.S. Administrations—President Bill Clinton, President George W. Bush, and President Barack Obama. Plan Colombia came to be viewed by some analysts as one of the most enduring and effective U.S. policy initiatives in the Western Hemisphere. Some have lauded the strategy as a model. In 2009, William Brownfield, then-U.S. Ambassador to Colombia, described Plan Colombia as "the most successful nation-building exercise that the United States has associated itself with perhaps in the last 25-30 years." Other observers, however, were critical of the policy as it unfolded. Many in the NGO and human rights community maintained the strategy, with its emphasis on militarization and security, was inadequate for solving Colombia's persistent, underlying problems of rural violence, poverty, neglect and institutional weakness. Nevertheless, it appears that improvements in security conditions have been accompanied by substantial economic growth and a reduction in poverty levels over time. The National Consolidation Plan first launched during the Uribe Administration, (renamed the National Plan for Consolidation and Territorial Reconstruction), was designed to coordinate government efforts in regions where marginalization, drug trafficking, and violence converge. The whole-of-government consolidation was to integrate security, development, and counternarcotics to achieve a permanent state presence in vulnerable areas. Once security forces took control of a contested area, government agencies in housing, education, and development would regularize the presence of the state and reintegrate the municipalities of these marginalized zones into Colombia. The plan had been restructured several times by the Santos government. The United States supported the Colombian government's consolidation strategy through an inter-agency program called the Colombia Strategic Development Initiative (CSDI). CSDI provided U.S. assistance to "fill gaps" in Colombian government programming. At the U.S. Embassy in Colombia, CSDI coordinated efforts of the U.S. Agency for International Development (USAID), the State Department's Narcotics Affairs Section, the U.S. Military Group, and the Department of Justice to assist Colombia in carrying out the consolidation plan by expanding state presence and promoting economic opportunities in priority zones. It combined traditional counternarcotics assistance for eradication, interdiction, alternative development, and capacity building for the police, military, and justice sector institutions with other economic and social development initiatives. As the peace agreement between the FARC and the government moved forward into implementation, the focus of U.S. assistance to Colombia has shifted again. With a foundation of the work done to advance consolidation, U.S. assistance has begun to aid in post-conflict planning and support Colombia's transition to peace by building up democratic institutions, protecting human rights and racial and ethnic minorities, and promoting economic opportunity. USAID's country cooperation strategy for 2014-2018 anticipated the Colombian government reaching a negotiated agreement with the FARC, but remained flexible if an agreement was not signed. It recognized early implementation efforts, especially in the first 24 months after signature, would be critical to demonstrate or model effective practices. In the next five years, it envisioned Colombia evolving from aid recipient to provider of technical assistance to neighbors in the region. Consolidating state authority and presence in the rural areas with weak institutions remains a significant challenge following the FARC's disarmament in the summer of 2017. Reintegration of the FARC and possibly other insurgent forces, such as the ELN, will be expensive and delicate. In particular, critics of the consolidation efforts of the Colombian government maintain that the Santos administration often lacked the commitment to hand off targeted areas from the military to civilian-led development and achieve locally led democratic governance. Consolidation efforts suffered from low political support, disorganization at the top levels of government, and failure to administer national budgets effectively in more remote areas, among other challenges. In August 2018, shortly after President Duque took office, USAID announced a framework of priorities for U.S. economic development assistance to Colombia. Some of these priorities include promoting and supporting a whole-of-government strategy to include the dismantling of organized crime; increasing the effectiveness of Colombia's security and criminal justice institutions; promoting enhanced prosperity and job creation through trade; improving the investment climate for U.S. companies; and advancing Colombia's capacity to strengthen governance and transition to sustainable peace, including reconciliation among victims, ex-combatants, and other citizens. The U.S. Congress initially approved legislation in support of Plan Colombia in 2000, as part of the Military Construction Appropriations Act of 2001 ( P.L. 106-246 ). Plan Colombia was never authorized by Congress, but it was funded annually through appropriations. From FY2000 through FY2016, U.S. funding for Plan Colombia and its follow-on strategies exceeded $10 billion in State Department and Defense Department programs. From FY2000 to FY2009, the United States provided foreign operations assistance to Colombia through the Andean Counterdrug Program (ACP) account, formerly known as the Andean Counterdrug Initiative, and other aid accounts. In FY2008, Congress continued to fund eradication and interdiction programs through the ACP account, but funded alternative development and institution building programs through the Economic Support Fund (ESF) account. In the FY2010 request, the Obama Administration shifted ACP funds into the International Narcotics Control and Law Enforcement (INCLE) account. Since FY2008, U.S. assistance has gradually declined because of tighter foreign aid budgets and nationalized Plan Colombia-related programs. In FY2014, in line with other foreign assistance reductions, funds appropriated to Colombia from State Department accounts declined to slightly below $325 million. In FY2015, Congress appropriated $300 million for bilateral assistance to Colombia in foreign operation. The FY2016 Omnibus Appropriations bill ( P.L. 114-113 ) provided Colombia from U.S. State Department and U.S. Agency for International Development accounts, slightly under $300 million, nearly identical to that appropriated in FY2015 (without P.L. 480, the Food for Peace account, the total for FY2016 was $293 million as shown in Table 1 ). In FY2017, Congress funded a program the Obama Administration had proposed called "Peace Colombia" to re-balance U.S. assistance to support the peace process and implementation of the accord. In May 2017, Congress approved a FY2017 omnibus appropriations measure, the Consolidated Appropriations Act, 2017 ( P.L. 115-31 ), which funded the various programs of Peace Colombia at $391.3 million. In the FY2017 legislation, Congress appropriated the following: The ESF account increased to $187 million (from $134 million in FY2016) to build government presence, encourage crop substitution to replace drug crops, and provide other assistance to conflict victims, including Afro-Colombian and indigenous communities. However, only $180 million was subsequently allocated. INCLE funding increased to $143 million with a focus on manual eradication of coca crops, support for the Colombian National Police, and judicial reform efforts. INCLE funding also included $10 million for Colombian forces' training to counterparts in other countries. $38.5 million in Foreign Military Financing (FMF); and $21 million in Nonproliferation, Anti-Terrorism, Demining, and Related Programs (NADR), which was a relatively large increase from under $4 million in FY2016 to focus on the demining effort. How the Trump Administration will engage with the issues of supporting post-conflict stability in Colombia has not been clearly defined by either the State Department or other executive departments. For example, the Trump Administration's proposed foreign aid budget for FY2018 would have reduced assistance to Colombia to $251 million. However, the FY2018 omnibus appropriations measure, approved by Congress in March 2018 ( P.L. 115-114 ), again included $391.3 million to support Colombia's transition to peace. The Trump Administration's FY2019 budget request for Colombia is $265 million, approximately a 32% reduction from the $391.3 million appropriated by Congress in FY2018. However, the House and Senate appropriations bills, H.R. 6385 and S. 3108 , again would support the funding level of $391.3 million. The FY2019 Administration request would reduce post-conflict recovery programs and place greater emphasis on counternarcotics and security. Below, Table 1 provides account data from the annual international affairs congressional budget justification documents. The information about DOD-funded programs was provided to the Congressional Research Service by DOD analysts in December 2015 and October 2017 (and has not been updated). The breakout of DOD assistance to Colombia is shown in Table 2 . . Colombia also has received additional U.S. humanitarian funding to help it cope with more than 1 million Venezuelan migrants. As of September 30, 2018, U.S. government humanitarian funding for the Venezuela response totaled approximately $96.5 million for both FY2017 and FY2018 combined, of which $54.8 million was for Colombia. (Humanitarian funding is drawn primarily from the global humanitarian accounts in annual Department of State/Foreign Operations appropriations acts.) In addition, the U.S. Navy hospital ship USNS Comfort is on an 11-week medical support mission deployed through the end of 2018 to work with government partners, in part to assist with arrivals from Venezuela. In Colombia, the U.S. response aims to help the Venezuelan arrivals as well as the local Colombian communities that are hosting them. In addition to humanitarian assistance, the United States is providing $37 million in bilateral assistance to support medium- and longer-term efforts by Colombia. Some Members of Congress have been deeply concerned about human rights violations in Colombia—especially those perpetrated by any recipients or potential recipients of U.S. assistance. In Colombia's multisided, 50-year conflict, the FARC and ELN, the paramilitaries and their successors, and Colombia's security forces have all committed serious violations. Colombians have endured generations of noncombatant killings, massacres, kidnappings, forced displacements, forced disappearances, land mine casualties, and acts of violence that violate international humanitarian law. The extent of the crimes and the backlog of human rights cases to be prosecuted have overwhelmed the Colombian judiciary, which some describe as "inefficient" and overburdened. The United Nations and many human rights groups maintain that although some prosecutions have gone forward, most remain unresolved and the backlog of cases has been reduced slowly. In addition to the problem of impunity for such serious crimes, continued violations remain an issue. Since 2002, Congress has required in the annual foreign operations appropriations legislation that the Secretary of State certify annually to Congress that the Colombian military is severing ties to paramilitaries and that the government is investigating complaints of human rights abuses and meeting other human rights statutory criteria. (The certification criteria have evolved over time. ) For several years, certification was required before 30% of funds to the Colombian military could be released. The FY2014 appropriations legislation requires that 25% of funding under the Foreign Military Financing (FMF) program be held back pending certification by the Secretary of State. Some human rights groups have criticized the regular certification of Colombia, maintaining that evidence they have presented to the State Department has contradicted U.S. findings. However, even some critics have acknowledged the human rights conditions on military assistance to Colombia to be "a flawed but useful tool" because the certification process requires that the U.S. government regularly consult with Colombian and international human rights groups. Critics acknowledge that over time, conditionality can improve human rights compliance. Additional tools for monitoring human rights compliance by Colombian security forces receiving U.S. assistance are the so-called "Leahy Law" restrictions, which Congress first passed in the late 1990s prior to the outset of Plan Colombia. First introduced by Senator Patrick Leahy, these provisions deny U.S. assistance to a foreign country's security forces if the U.S. Secretary of State has credible information that such units have committed "a gross violation of human rights." The provisions apply to security assistance provided by the State Department and DOD. The Leahy Law under the State Department is authorized by the Foreign Assistance Act (FAA) of 1961, as amended, and is codified at 22 U.S.C. 2378d (§520M of the FAA). The DOD Leahy provisions, which for years applied just to DOD training, now include a broader range of assistance, as modified in the FY2014 appropriations legislation. The provision related to the Leahy Laws for DOD assistance is codified at 10 U.S.C. 362, and prohibits "any training, equipment, or other assistance," to a foreign security force unit if there is credible information that the unit has committed a gross violation of human rights. Both the State Department and DOD Leahy provisions require the State Department to review and clear—or vet—foreign security forces to determine if any individual or unit is credibly believed to be guilty of a gross human rights violation. Leahy vetting is typically conducted by U.S. embassies and State Department headquarters. Reportedly on an annual basis about 1% of foreign security forces are disqualified from receiving assistance under the Leahy provisions, although many more are affected by administrative issues and are denied assistance until those conditions are resolved. Tainted security force units that are denied assistance may be remediated or cleared, but the procedures for remediation differ slightly between the DOD and State (or FAA) provisions. Because of the large amount of security assistance provided to Colombian forces (including the military and police), the State Department reportedly vets more candidates for assistance in Colombia than in any other country. In the late 1990s, poor human rights conditions in Colombia were a driving concern for developing the Leahy Law provisions. The U.S. Embassy in Bogotá, with nearly two decades of experience in its vetting operations, has been cited as a source of best practices for other embassies seeking to bring their operations into compliance or enhance their performance. State Department officials have cited Colombia as a model operation that has helped Colombia to improve its human rights compliance. However, some human rights organizations are critical of the Leahy vetting process in Colombia, and cite the prevalence of extrajudicial executions allegedly committed by Colombian military units as evidence that these restrictions on U.S. assistance have failed to remove human rights violators from the Colombian military. A human rights nongovernmental organization, Fellowship of Reconciliation, has published reports alleging an association between false positive killings and Colombian military units vetted by the State Department to receive U.S. assistance. However, some have questioned the group's methodology. Some human rights organizations contend that the U.S. government has tolerated abusive behavior by Colombian security forces without taking action or withholding assistance. Measured exclusively in counternarcotics terms, Plan Colombia has been a mixed success. Colombia remains the dominant producer of cocaine and in the DEA's National Drug Threat Assessment for 2017 continued to be the source for 95% of cocaine seized in the United States. Enforcement, eradication, and improved security squeezed production in Colombia, so that in 2012, Peru reemerged as the global leader in cocaine production, surpassing Colombia, for a year or so. In the early 2000s, given Colombia's predominance as the source of cocaine destined for U.S. markets and its status as the second-largest producer of heroin consumed in the United States, eradication of coca bush and opium poppy (from which heroin is derived) was an urgent priority and became the preferred tool for controlling the production of these drugs. Another critical component of the drug supply reduction effort was alternative development programs funded by the U.S. Agency for International Development (USAID) to assist illicit crop cultivators with transitioning to licit crop production and livelihoods. Analysts have long debated how effective Plan Colombia and its follow-on strategies were in combating illegal drugs. Although Plan Colombia failed to meet its goal of reducing the cultivation, processing, and distribution of illicit drugs by 50% in its original six-year time frame, Colombia has sustained significant reductions in coca cultivation in recent years. According to U.S. estimates, cultivation of coca declined from 167,000 hectares in 2007 to 78,000 hectares in 2012. (Poppy cultivation declined by more than 90% between 2000 and 2009.) According to U.S. government estimates, Colombia's potential production of pure cocaine fell to 170 metric tons in 2012, the lowest level in two decades. However, it started to rise slightly in 2013, and more dramatically in 2014 through 2016. In those years, cultivation of coca and production of cocaine grew significantly in part due to ending the aerial eradication of coca crops. In 2015, following a U.N. agency determination that the herbicide used to spray coca crops was probably carcinogenic, Colombia's minister of health determined that aerial eradication of coca was not consistent with requirements of Colombia's Constitutional Court. In 2016, as noted above, the U.S. DEA reported that 95% of cocaine seized in the United States originated in Colombia. According to U.S. Office of National Drug Control Policy, Colombia in 2017 cultivated an unprecedented 209,000 hectares of coca, from which cocaine is derived, capable of generating 921 metric tons of cocaine. The United Nations estimates for 2017, which typically differ in quantity but follow the same trends as U.S. estimates, maintained that Colombia's potential production of cocaine reached nearly 1,370 metric tons, 31% above its 2016 estimate. Even with Colombia's economic stability and improving security, cocaine exports (primarily to the U.S. market) remain a major concern for U.S. lawmakers. However, in drug interdiction, Colombia has set records for many years and is considered a strong and reliable U.S. partner. The United Nations Office on Drugs and Crime ( Table 4 ), shows Colombia cultivating 146,000 hectares of coca in 2016, a 52% increase over 2015 and another increase to 171,000 hectares, a 17% increase, in 2017. Although cocaine seizures were quite high in both years, the interdiction of cocaine was insufficient to counter the large increases in production. Both manual eradication and aerial eradication were central components of Plan Colombia to reduce coca and poppy cultivation. Manual eradication is conducted by teams, usually security personnel, who uproot and kill the plant. Aerial eradication involves spraying the plants from aircraft with an herbicide mixture to destroy the drug crop, but it may not kill the plants. In the context of Colombia's continuing internal conflict, manual eradication was far more dangerous than aerial spraying. U.S. and Colombian policymakers recognized the dangers of manual eradication and, therefore, employed large-scale aerial spray campaigns to reduce coca crop yields, especially from large coca plantations. Colombia is the only country globally that aerially sprayed its illicit crops, and the practice has been controversial for health and environmental reasons, resulting in a Colombian decision to end aerial eradication in 2015. Since 2002, as a condition of fully funding the spraying program, Congress has regularly directed the State Department, after study and consultation with the U.S. Environmental Protection Agency and other relevant agencies, to certify that the spraying did not "pose unreasonable risks or adverse effects to humans or the environment." This certification requirement was included most years in the annual foreign operations appropriations legislation. Some analysts have also raised questions about the monetary and collateral costs of aerial eradication compared with other drug supply control strategies, its effectiveness, and its limited effect on the U.S. retail price of cocaine. U.S. State Department officials attribute Colombia's decline in coca cultivation after 2007 and prior to 2013 to the persistent aerial eradication of drug crops in tandem with manual eradication where viable. Between 2009 and 2013, Colombia aerially sprayed roughly 100,000 hectares annually. In 2013, however, eradication efforts declined. Colombia aerially eradicated roughly 47,000 hectares. It manually eradicated 22,120 hectares, short of the goal of 38,500 hectares. This reduction had a number of causes: the U.S.-supported spray program was suspended in October 2013 after two U.S. contract pilots were shot down, rural protests in Colombia hindered manual and aerial eradication efforts, and security challenges limited manual eradicators working in border areas. In late 2013, Ecuador won an out-of-court settlement in a case filed in 2008 before the International Court of Justice in The Hague for the negative effects of spray drift over its border with Colombia. In negotiations with the FARC, the government and the FARC provisionally agreed in May 2014 that voluntary manual eradication would be prioritized over forced eradication. Aerial eradication remained a viable tool in the government's drug control strategy, according to the agreement, but would be permitted only if voluntary and manual eradication could not be conducted safely. In April 2015, the Santos administration determined that glyphosate, a broad-spectrum, nonselective herbicide used commercially, but in Colombia sprayed on coca plants to eradicate them, was "probably carcinogenic" to humans in a review published by a World Health Organization (WHO) affiliate. In October 2015, the government ended spraying operations and began to implement a new public health approach toward illicit drugs, one that proponents suggested would reduce human rights violations. On the supply side, Colombia's new drug policy gives significant attention to expanding alternative development and licit crop substitution while intensifying interdiction efforts. The State Department in its 2015 International Narcotics Control Strategy Report (INCSR), however, warned that illicit cultivation was expanding in areas long off-limits to aerial spraying, including national parks, a buffer zone with Ecuador where aerial eradication has been restricted, and in indigenous or protected Afro-Colombian territories. Colombian interdiction practices are deemed some of the most effective in the world. The Colombian government reported seizing more than 207 metric tons (mt) of cocaine base in 2014 and that seizure total doubled by 2017 with capture of 442 mt of cocaine. According to the U.S. State Department's 2018 INCSR , Colombia also seized 197 mt of marijuana, 348 kilograms of heroin, and destroyed more than 3,400 cocaine base and hydrochloride labs. USAID funds and runs alternative development programs in Colombia to assist communities with transitioning from a dependency on illicit crops to licit employment and livelihoods. Alternative development was once focused narrowly on crop substitution and assistance with infrastructure and marketing. Since the Colombian government's shift to a consolidation strategy, USAID has supported "consolidation and livelihoods" programming in 40 of the 58 strategically located, conflict-affected municipalities targeted by the government's National Consolidation Plan. To facilitate economic development, USAID funds initiatives that assist farmers and others with shifting from coca growing to licit economic opportunities. These programs are designed to strengthen small farmer producer organizations, improve their productivity, and connect them to markets. Some observers maintain that poor and unsustainable outcomes from alternative development programs while the Colombian conflict was still under way resulted from ongoing insecurity and lack of timeliness or sequencing of program elements. The renewed commitment to alternative development and crop substitution in the 2016 peace accord with the FARC may be similarly challenged. Formal implementation of the peace accord on drug eradication and crop substitution began in late May 2017 with collective agreements committing communities to replace their coca crops with licit crops. In some regions, the program is extended to families who cultivate coca and also to producers of legal crops and landless harvesters. The Colombian government also committed to a combined approach of both voluntary and forced manual eradication. The government's goal set for 2017 was eradicating 100,000 hectares of coca, 50,000 through forced manual eradication and 50,000 through "crop substitution" accords reached with coca farming households who would voluntary eradicate. At the U.S.-Colombia High Level Dialogue held in Bogotá in March 2018, a renewed commitment to the enduring partnership between the United States and Colombia was announced. A major outcome was a U.S.-Colombia pledge to reduce illegal narcotics trafficking through expanded counternarcotics cooperation. The new goal set was to reduce Colombia's estimated cocaine production and coca cultivation to 50% of current levels by 2023. In addition, a memorandum of understanding was signed to combat the illegal gold mining that funds transnational criminal organizations. Although President Duque appears determined to pursue a more aggressive approach to drug policy, he has not clearly stated how his approach to counternarcotics will differ from that of his predecessor. The government may restart aerial eradication, a strategy that ended in 2015 due to the Colombian Health Ministry's concerns over cancer-causing potential of the herbicide glyphosate, but no precise plans for restarting the program have been announced in the Duque Administration's first three months in office. Experimentation with delivering glyphosate by drones (rather than planes) began in June 2018 under the Santos Administration and is continuing under the Duque government. On October 1, 2018, President Duque authorized police to confiscate and destroy any quantity of drugs found on persons in possession of them, resulting in the seizure of more than 7 metric tons of drugs in less than two weeks. This enforcement measure may violate a 1994 Colombian Constitutional Court ruling, however, in which Colombians may carry small doses of drugs for personal use, including marijuana, hashish, and cocaine. Several court challenges have been filed that seek to nullify the Duque decree on constitutional grounds of protected personal use. Drug trafficking continues to trigger conflict over land in Colombia while affecting the most vulnerable groups, including Afro-Colombian, peasant, and indigenous populations. Some analysts warn that national and international pressure for drug eradication could also lead to increased human rights violations, including health consequences by reviving aerial spraying of drug crops and government actions to forcibly break up demonstrations by coca producers who resist eradication. Some analysts have advocated that investments to lower drug supply need to go beyond eradication, which has not been a lasting approach to reducing drug crop cultivation. For instance, the government could provide economic and education opportunities to at-risk youth to enhance their role in peace building and to prevent their recruitment into the drug trade and other illegal activity. Economic relations between Colombia and the United States have deepened. The U.S.-Colombia Free Trade Agreement (FTA) entered into force in May 2012. By 2020, it will phase out all tariffs and other barriers to bilateral trade between Colombia and the United States, its largest trade partner. Since the U.S.-Colombia FTA went into force, the stock of U.S. investment in Colombia surpassed $7 billion in 2014 but dropped to $6.2 billion in 2016 (on a historical cost basis), concentrated mostly in mining and manufacturing. According to the U.S. Department of Commerce, U.S. exports to Colombia exceeded $26.8 billion in 2016 and Colombia was the 22 nd -largest market for U.S. exports; however, U.S. imports from Colombia declined between 2015 and 2016. Major U.S. exports to Colombia include oil (noncrude oil products including gasoline), machinery, cereals, organic chemicals, and plastic. Because 65% of U.S. imports from Colombia are crude oil imports, much of the decline in value was caused by the sharp fall in oil prices that began in 2014. Major U.S. imports beside crude oil, include gold, coffee, cut flowers, and fruits. Congressional interest in Colombia now extends far beyond security and counternarcotics and has grown in the area of bilateral trade following implementation of the U.S.-Colombia FTA, (also known at the U.S.-Colombia Trade Promotion Agreement). Colombia is a founding member of the Pacific Alliance, along with Chile, Mexico, and Peru, and has sought to deepen trade integration and cross-border investment with its partners in the alliance while reducing trade barriers. The Pacific Alliance aims to go further by creating a common stock market, allowing for the eventual free movement of businesses and persons, and serving as an export platform to the Asia-Pacific region. Colombia's leadership role in the Pacific Alliance and Colombia's accession to the Organization for Economic Cooperation and Development (OECD) in May 2018, following a review of the country's macroeconomic policies and changes, are major new developments. The accession to the OECD was approved by Colombia's lower house in October 2018 and the Senate in November 2018, but it remained under final review by Colombia's Constitutional Court in early February 2019. The Santos administration pushed to meet the criteria required for OECD membership because it maintained that such recognition signified Colombia's attainment of world-class development standards and policies. Colombia has made progress on trade issues such as copyright, pharmaceuticals, fuel and trucking regulations, and labor concerns (including subcontracting methods and progress on resolving cases of violence against union activists). Congress remains interested in Colombia's future because the country has become one of the United States' closest allies. With 17 years of investment in Colombia's security and stability, some maintain that there has already been a strong return on U.S. investment. Plan Colombia and its successor strategies broadened from counternarcotics to include humanitarian concerns, efforts to bolster democratic development and human rights protections, and trade and investment to spark growth. The record expansion of Colombia's coca crop and increasing cocaine exports to the United States, however, may significantly hinder the effort to consolidate peace in Colombia and could potentially increase corruption and extortion. A significant portion of the Colombian public remains skeptical of the peace process and the FARC's role in Colombia's democracy. Other Colombians maintain that support for peace programs in Colombia is important not only to benefit former FARC or other demobilized combatants but also to fulfill promises the government made in the peace accords to the country's 8.6 million victims of the five-decade conflict. As President Duque concluded his first 100 days in office, his government faced overlapping challenges: (1) an upsurge in illicit drug crops, which had set records in 2016 and 2017; (2) implementation of provisions of the peace accord negotiated by former president Santos but marred by slow implementation, attacks on land and human rights activists, and projected budgetary shortfalls; (3) renewed violent competition among criminal groups in rural areas, some of which reportedly are sheltering in Venezuela; and (4) Venezuela's humanitarian crisis, which resulted in a surge of migrants fleeing to or through Colombia. The annual level of foreign assistance provided by the U.S. Congress for Colombia began to decline in FY2008 and then gradually increased in FY2017 and FY2018 to support peace and implementation of the FARC-government peace accord. Some Members of Congress may want to build on cooperation with Colombian partners to continue to train Central Americans and other third-country nationals in counternarcotics and security, including programs in citizen security, crime prevention and monitoring, military and police capacity building, and hostage negotiation and cybersecurity. Congress may continue to closely monitor Colombia's domestic security situation. It also may continue to oversee issues such as drug trafficking; Colombia's effort to combat other illegal armed groups such as Bacrim; the status of human rights protections; and the expansion of health, economic, environmental, energy, and educational cooperation. Congress may seek to foster Colombian leadership in the region to counter growing political instability in Venezuela. The U.S. Congress has been interested in expanding investment and trade opportunities both bilaterally with Colombia and within regional groupings, such as the Pacific Alliance. Some analysts contend that U.S.-Colombian trade improvements rest on the strength of the overall relationship between Colombia and the United States. 

Question: Write a one-page summary of the report 1.

Answer: Regulation of the banking industry has undergone substantial changes over the past decade. In response to the 2007-2009 financial crisis, many new bank regulations were implemented pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (Dodd-Frank Act; P.L. 111-203) or under the existing authorities of bank regulators to address apparent weaknesses in the regulatory regime. While some observers view those changes as necessary and effective, others argued that certain regulations were unjustifiably burdensome. To address those concerns, the Economic Growth, Regulatory Relief, and Consumer Protection Act of 2018 (P.L. 115-174) relaxed certain regulations. Opponents of that legislation argue it unnecessarily pared back important safeguards, but proponents of deregulation argue additional pare backs are needed. Meanwhile, a variety of economic and technological trends continue to affect banks. As a result, the 116th Congress faces many issues related to banking, including the following: Safety and Soundness. Banks are subject to regulations designed to reduce the likelihood of bank failures. Examples include requirements to hold a certain amount of capital (which enables a bank to absorb losses without failing) and the so-called Volcker Rule (a ban on banks' proprietary trading). In addition, anti-money laundering requirements aim to reduce the likelihood banks will execute transactions involving criminal proceeds. Banks are also required to take steps to avoid becoming victims of cyberattacks. The extent to which these regulations (i) are effective, and (ii) appropriately balance benefits and costs is a matter of debate. Consumer Protection, Fair Lending, and Access to Banking. Certain laws are designed to protect consumers and ensure that lenders use fair lending practices. The Consumer Financial Protection Bureau has authorities to regulate for consumer protection. No consensus exists on whether current regulations strike an appropriate balance between protecting consumers while ensuring access to credit and justifiable compliance costs. In addition, whether Community Reinvestment Act regulations as currently implemented effectively and efficiently encourage banks to provide services in their areas of operation is an open question. Large Banks and "Too Big To Fail." Regulators also regulate for systemic risks, such as those associated with very large and complex financial institutions that may contribute to systemic instability. Dodd-Frank Act provisions include enhanced prudential regulation for certain large banks and changes to resolution processes in the event one fails. In addition, bank regulators imposed additional capital requirements on certain large, complex banks. Subsequently, some argued that certain of these additional regulations were too broadly applied and overly stringent. In response, Congress reduced the applicability of the Dodd-Frank measures and regulators have proposed changes to the capital rules. Whether relaxing these rules will provide needed relief to these banks or unnecessarily pare back important safeguards is a debated issue. Community Banks. The number of small or "community" banks has declined substantially in recent decades. No consensus exists on the degree to which regulatory burden, market forces, and the removal of regulatory barriers to interstate branching and banking are causing the decline. What Companies Should Be Eligible for Bank Charters. To operate legally as a bank, an institution must hold a charter granted by a state or federal government. Traditionally, these are held by companies generally focused on and led by people with experience in finance. However, recently companies with a focus on technology are interested in having legal status as a bank, either through a charter from the Office of the Comptroller of the Currency or a state-level industrial loan company charter. Policymakers disagree over whether allowing these companies to operate as banks would create appropriately regulated providers of financial services or inappropriately extend government-backed bank safety nets and disadvantage existing banks. Recent Market and Economic Trends. Changing economic forces also pose issues for the banking industry. Some observers argue that increases in regulation could drive certain financial activities into a relatively lightly regulated "shadow banking" sector. Innovative financial technology may alter the way certain financial services are delivered. If interest rates rise, it could create opportunities and risks. Such trends could have implications for how the financial system performs and influence debates over appropriate banking regulations.