daniel k tarullo : opening remarks at the economic growth and regulatory paperwork reduction act outreach meeting opening remarks by mr daniel k tarullo, member of the board of governors of the federal reserve system, at the economic growth and regulatory paperwork reduction act outreach meeting, arlington, virginia, 2 december 2015. * * * on behalf of the federal reserve board, let me join my colleagues from the other bank regulatory agencies in welcoming you to this sixth and final outreach meeting being held as part of the interagency review process under the economic growth and regulatory paperwork reduction act ( egrpra ). as you know, egrpra requires the federal banking agencies to conduct a decennial joint review of our regulations to identify those that are outdated, unnecessary, or unduly burdensome. at the third outreach meeting this past spring, i suggested that we could regard the egrpra review as a success only if it leads to significant reduction in regulatory burden for smaller banks. over the course of this year, there has been a wide range of comments on a wide range of regulatory practices. but many have been concentrated in what are obviously a few key areas of concern to smaller banks. these include simplifying the regulatory capital rules for smaller community banks ; modifying the information collected by consolidated reports of condition and income, the so - called “ call report ” ; and updating certain regulations and supervisory practices under the community reinvestment act to reflect current banking practices. first, many commenters have urged a change regarding the application of the basel iii capital requirements to community banks. they have argued that simpler capital rules are needed to reduce the compliance burden for smaller institutions because it is disproportionate to the benefits of the framework ’ s increased risk sensitivity. the greater detail of the basel iii framework requires a degree of categorization, recordkeeping, and reporting that can be particularly costly for smaller community banks. as i have publicly stated before, i believe that it is possible to develop a simpler set of capital requirements for smaller banks that will be consistent both with the safety and soundness aims of prudential regulation and with our statutory obligations such as the collins amendment. second, commenters have called for changes to the call report. the call report is filed quarterly and used by regulators to monitor the safety and soundness, performance, and risk profile of each institution and to assess the condition of the banking system. many of the comments have advocated modifying the types and amounts of information

8perspective would be helpful for historical reference when formulating appropriate balance sheet policy as a monetary policy response to future episodes when the conventional interest rate tool is near zero. another important difference between the fomc ’ s balance sheet policy following the pandemic and its balance sheet policy following the 2008 financial crisis was the speed and timing of the subsequent reduction in the size of the federal reserve ’ s securities holdings during the period of qt. 13 this difference reflects the larger amount of securities purchases compared to the earlier periods of qe as well as the quite different economic conditions facing the fomc at the start of qt post - pandemic. these conditions included too - high inflation and a desire by the fomc to tighten monetary policy through both the federal funds rate and the balance sheet tools. so far, the rapid and sustained pace of the federal reserve ’ s securities runoff has proceeded relatively smoothly. a useful question for further inquiry is to what extent during the post - pandemic period has qt served to further tighten financial conditions. with the understanding that qt is a tool employed beyond conventional monetary policy restriction, how does one measure the incremental increase above the fomc ’ s concurrent increases in the target range for the federal funds rate and related forward guidance regarding its policy rate? evidence to date suggests that qt exerts an independent effect on tightening financial conditions, though in some cases it may be asymmetric to the effects of qe. 14 quantifying the effects of qt as well as qe will be the pace of balance sheet runoff beginning in 2022 has been roughly double the pace of the balance sheet runoff that occurred from 2017 to 2019. du, forbes, and luzzetti ( 2024 ) argue that the effects of qt are asymmetric to qe. this result may be due, in part, to investor expectations for qt before the authors look at announcement effects. see wenxin du, kristin forbes, and matthew n. luzzetti ( 2024 ), “ quantitative tightening around the globe : what have we learned? ” nber working paper series 32321 ( cambridge, mass. : national bureau of economic research, april ), https : / / www. nber. org / papers / w32321 ; and lorie logan ( 2024 ), “ discussion of - 9helpful to policymakers in their future deliberations regarding use of the balance sheet in