A small clarification. Section 2(c) was modified to specify that tailoring factors apply to a specific regulatory action, and Section 2(d) now explicitly requires agencies to disclose how they applied the tailoring requirements in rulemaking notices. The bill's core policy remains unchanged.
TAILOR Act of 2025
- Sponsor
- Rep. Loudermilk, Barry [R-GA-11]
- Committees
- Financial Services Committee (primary)
- Last action
- Jun 4, 2025
Bottom line
The TAILOR Act of 2025 aims to reduce regulatory burden on financial institutions, particularly smaller ones, by requiring federal agencies to apply a proportional, risk-based approach to regulation and review existing rules for similar tailoring.
What it actually does
This bill mandates that federal financial institutions regulatory agencies consider the risk profiles and business models of institutions when issuing new rules or regulations. It requires agencies to tailor regulatory actions to limit the burden on institutions appropriate to their risk. Furthermore, it includes a look-back provision, requiring agencies to review and potentially revise regulations issued in the past 15 years to apply this tailoring principle. The bill also calls for reduced reporting requirements for certain community banks and a report to Congress on modernizing bank supervision.
Proponents argue
Proponents argue that the bill will alleviate the disproportionate regulatory burden on community banks and credit unions, allowing them to allocate more resources to serving local customers and markets rather than compliance. They contend that a one-size-fits-all regulatory approach is inefficient and can stifle economic growth, and that tailoring regulations to an institution's actual risk profile enhances efficiency without compromising financial stability.
Opponents contend
Opponents might express concerns that mandating regulatory tailoring could lead to a weakening of financial oversight, potentially creating loopholes or inconsistent application of rules that could increase systemic risk or reduce consumer protections. They may argue that a robust regulatory framework, applied consistently, is essential for maintaining financial stability and preventing future crises, and that 'tailoring' could be exploited to reduce necessary safeguards.
The bill is concise and clearly written, making it accessible for a quick and informed evaluation by any interested reader.
Section 2(b)
Tailoring Regulatory Actions to Risk and Business Model
This provision requires all Federal financial institutions regulatory agencies to consider the risk profile and business models of different types or classes of institutions when taking any regulatory action (rules or regulations). It mandates that these agencies tailor the regulatory action to limit its impact, including costs and human resource allocation, in a manner appropriate for the institution's risk profile and business model. This aims to ensure regulations are proportional to the risks posed by different financial entities.
Supporters argue
Supporters argue this provision ensures that regulations are applied proportionally, preventing smaller, less complex institutions from being unduly burdened by rules designed for large, systemically important entities. This allows community banks and credit unions to better serve their local communities.
Critics contend
Critics may contend that this provision could lead to inconsistent application of regulations, potentially creating regulatory arbitrage opportunities or weakening overall financial oversight if 'tailoring' is interpreted too broadly, thereby increasing risk.
Tradeoffs
The provision balances the desire for regulatory efficiency and reduced burden on smaller institutions against the need for robust and consistent oversight to maintain financial stability and consumer protection across the entire financial system.
Section 2(d)
Disclosure and Documentation of Tailoring
This section requires each Federal financial institutions regulatory agency to explicitly disclose and document in every notice of proposed rulemaking and final rulemaking how they have applied the tailoring requirements outlined in subsections (b) and (c). This ensures transparency in the regulatory process and accountability for implementing the bill's core mandate.
Section 2(f)
Limited Look-back Application for Existing Regulations
This provision mandates that Federal financial institutions regulatory agencies conduct a review of all final regulations issued during the 15-year period prior to the bill's introduction (May 14, 2025) and apply the new tailoring requirements to these existing rules. Any regulation revised under this review must be completed within three years of the bill's enactment. This means the tailoring principle will apply not just to future rules but also to a significant body of existing financial regulations.
Section 3
Short-Form Call Reports for Community Banks
This section requires appropriate Federal banking agencies to create a reduced reporting requirement for all banks eligible for the Community Bank Leverage Ratio (CBLR) when submitting their first and third reports of condition each year. The CBLR is a simplified capital framework for qualifying community banks, and this provision extends that simplification to their quarterly reporting obligations, aiming to further reduce administrative burden.
Section 4
Report to Congress on Modernization of Supervision
This section mandates that appropriate Federal banking agencies, in consultation with State bank supervisors, submit a report to Congress within 18 months of enactment. The report must address the modernization of bank supervision, covering factors such as changing bank business models, examiner workforce and training, supervisory activities structure, bank-supervisor communication, use of supervisory technology, factors unique to community banks, and necessary statutory changes for more effective supervision.
The definition of 'regulatory action' explicitly excludes any action taken by a Federal financial institutions regulatory agency that is solely applicable to an individual institution, including an enforcement action or order.
Section 2(a)(2)
Why it matters:This is standard legislative practice to precisely define the scope of a bill's application, ensuring clarity on what types of agency actions are subject to the tailoring mandate and which are not.
Case for: Defining 'regulatory action' to exclude individual enforcement actions ensures that agencies retain full discretion to address specific risks or misconduct at individual institutions without being constrained by the broader tailoring requirements, thus preserving their ability to enforce laws effectively.
Case against: Some might argue that excluding enforcement actions from the tailoring mandate could lead to inconsistencies, where general rules are tailored but individual enforcement actions might not reflect the same proportional approach, potentially creating an uneven playing field or perceived unfairness.
Estimated impact: This limits the scope of the bill's primary mandate, ensuring that the tailoring requirements apply to general rules and regulations, not to specific actions against individual banks.
In carrying out the tailoring requirements, agencies must consider 'the potential that efforts to implement the regulatory action and third-party service provider actions may work to undercut efforts to tailor the regulatory action'.
Section 2(c)(2)
Why it matters:This is a nuanced but important consideration, acknowledging the practical challenges of implementing tailored regulations, especially when third-party vendors are involved. It's a specific instruction within a list of general factors.
Case for: This provision is a practical recognition that third-party service providers often impose their own 'one-size-fits-all' compliance requirements on financial institutions, regardless of regulatory tailoring. By requiring agencies to consider this, the bill aims to prevent such third-party actions from negating the intended regulatory relief.
Case against: No direct case against, but some might argue it adds complexity to agency analysis without a clear mechanism for enforcement or resolution if third-party actions do undercut tailoring.
Estimated impact: This provision highlights a potential practical challenge to the bill's intent and requires agencies to be mindful of it, potentially influencing how they design or oversee compliance with tailored regulations.