federal deposit insurance and other safeguards were never intended. the interagency regulation implementing the volcker rule is not the most effective way of achieving its very laudable and important goal. we are exploring ways to streamline and simplify the regulation to reduce costs without weakening the key objectives. we should be able to provide firms and supervisors with greater clarity about what constitutes permissible market - making. we should also identify ways to further tailor the volcker compliance regime to focus on firms with large trading operations and reduce the compliance burden for small banking entities with limited trading operations. i also support moving forward with minimum haircuts for securities financing transactions ( sfts ) on a marketwide basis to counter the growth of volatile funding structures outside the banking sector. international agreement on a regulatory framework for minimum sft haircuts was reached by financial regulators in 2015, and it is important to follow through on this work plan. while current market practices in this area may well exhibit much better risk management than pre - crisis, past experience suggests we cannot rely on prudent practices to remain in place as competitive and cyclical pressures build. regulatory minimum haircuts calibrated to be appropriate through the cycle could help ensure that repo, securities lending, and securities margin lending and related markets do not become a source of instability in periods of financial stress through fire sales and run - type behavior. here, i have focused primarily on the reforms that are most important for the resilience of the large interconnected banking organizations at the core of our system. outside of this group, i favor better tailoring the regulatory framework for our smaller banking firms so as to decrease regulatory burden. while we have taken some important steps to reduce burden on smaller banking organizations such as streamlining the call report for small, less complex community banks, increasing appraisal thresholds for cre loans, and reducing the frequency of exams in certain circumstances, there is more we should do. conclusion history and experience show that stable economic growth is aided by strong regulatory buffers that bolster the resilience of our large banking organizations and help reduce the severity of downturns. at a time when cyclical pressures are building, and asset valuations are stretched, we should be calling for large banking organizations to safeguard the capital and liquidity buffers they have built over the past few years. maintaining resilience over the cycle can be accomplished through a combination of structural and countercyclical buffers whose calibrations are inherently

two years. they expressed the view that this may be the result of a tighter supply of credit by larger financial institutions. they noted that their ability to meet increased demand is limited by capital constraints and underwriting capacity. credit unions also noted the statutory limitation on the percentage of small business loans they may make ( 12. 25 percent of total assets ). – at several meetings, participants noted that some small businesses are turning toward non - mainstream finance sources such as factoring companies and pay - day loans, which carry higher fees and interest rates, due to the lack of conventional credit sources. – in detroit, credit union service organizations are working to provide scale for making small business loans by centralizing some aspects of the underwriting process. – on the other hand, in new york, some credit unions indicated that outsourcing underwriting is not always an effective solution to capacity constraints, stating that they lose control over quality in outsourcing. – a credit union in tampa expressed the view that credit unions that are new to small business lending do not have an established infrastructure to compete with the bigger banks, particularly in areas such as sba programs. – in nashville, it was noted that some cdfis are receiving loan applications from businesses that they would not expect to hear from, such as moreestablished businesses whose financial conditions are better than those of clients they served several years ago. – in chicago, the chicago urban league, which offers bridge loans to companies that have gone through its entrepreneurship training and coaching programs, reported making such loans to businesses that could not get credit from banks. a banker indicated that several banks participating in the meeting were founding investors in the league ’ s loan fund. – at several meetings, cdfi participants described the challenges in becoming authorized to provide loans under the sba ’ s 7 ( a ) program. factors impacting the demand for small business credit small businesses and bank participants noted that the economic downturn has diminished sales for many small businesses, weakening balance sheets and asset values and thus dampening small business loan demand. some financial institutions reported weaker quality in loan applications from small businesses. comments related to credit demand by small businesses included issues of reduced credit quality, reduced confidence, a need for additional technical assistance, and interest in government contracting and entrepreneurship. reduced credit quality – banks generally attributed the decrease in overall lending to small businesses to their declining sales and asset valuations. they reported lower overall demand for credit from creditworthy businesses. some financial institutions also noted that