Some predict that 2014 may finally be the year when the momentum begins to shift.
By all accounts, 2013 saw a continuance of the regulatory tightening that followed the 2008 turmoil, mostly due to Dodd-Frank implementation.
The Consumer Financial Protection Bureau unveiled rules redefining mortgage underwriting which go into effect in early 2014.
The ramp-up will surely continue into the New Year. Some observers say the CFPB may just be hitting its stride, while regulators are expected to soon release rules dealing with big-bank capital surcharges and final supervisory changes mandated by Dodd-Frank. Regulators have also yet to finish a key rule from the law requiring securitizers to retain credit risk.
"Not all of the Dodd-Frank rules are out there yet. There is still more work to do and more regulations to be written. Obviously, most of the big ones are done, but not all," said Ellen Seidman, a former director of the Office of Thrift Supervision and now a senior fellow at the Urban Institute. "That's going to keep going."
Others said the completion of rules already in place like the CFPB's mortgage regulations and the Volcker Rule simply means the baton moves to the industry to address compliance issues and to the examiners enforcing the new requirements. The mortgage rules create legal protections for a safe class of loans known as "Qualified Mortgages." Loans that fall outside that category face new underwriting standards, but non-QM borrowers can still challenge the bank's process in court.
Banks "want to get a comfort level with the examination process," said Charles Vice, who is Kentucky's financial institutions commissioner and chairman of the Conference of State Bank Supervisors. He added that how courts weigh in on cases involving non-QM loans is still an open question.
"It could be another two to three years before a court needs to look at a non-QM loan to determine how they will rule on it," Vice said. "That creates some uncertainty for banks."
But there were also encouraging signs in 2013.
Seidman credited the agencies for sounding willing to reopen newer rulemakings if they need fixes. She noted recent remarks by CFPB Director Richard Cordray about the bureau's intention to monitor implementation of its mortgage rules to consider where amendments are needed.
"He meant that in both directions," she said. "At least with respect to consumer regulation, you're getting the signal that compliance is expected, but if compliance turns out to generate serious problems in terms of access, availability and complexity that are unjustified, they're willing to take another look. I would suspect that you're going to see some of the same kind of thinking among the prudential regulators also."
Seidman added that a key factor in determining the regulatory environment in 2014 and beyond is how examiners interpret the new rules. But there, she said, there is reason to be optimistic.
"The regulations are on paper. How they're actually implemented can vary tremendously," she said. "The examiners have been in a zero tolerance mode for a while. It's likely that that will loosen up some as capital cushions grow and if the examiners and the system as a whole become convinced that what you're not getting is a situation where with capital cushions growing the banks' reaction is, 'Well, we'd better reach for yield because otherwise our ROEs can go down.'"