I mentioned in my previous post that regulatory restrictions include words such as “shall”, “must”, “may not”, “required” and “prohibited”. In this post, I will break down the regulatory restrictions in Title 12 of the Code of Federal Regulations (CFR), which concerns banks and banking, by word.

The plots will show that as of 2016, the word “must” appears with the highest frequency within the CFR parts covering the Office of the Comptroller of the Currency (OCC), the Federal Reserve and the Federal Deposit Insurance Corporation (FDIC). “Shall” still remains the most frequently used word for the adjusted measure of Title 12 regulatory restrictions, although “must” has closed the gap. Also, much of the rise in the frequency for “must” has occurred since 2007 as the financial crisis unfolded and officials to action. Current Federal Register guidelines suggest that “must” is the only term of obligation (“shall” may sometimes get interpreted as “may”; also occurrences of “must” can also include “must not”). So the rise of “must” may indicate that the OCC, Federal Reserve and FDIC have wanted to ensure compliance.

The figure below depicts the time paths of the occurrence of the five terms within OCC regulatory restrictions; the black vertical line indicates the start of the 2007–2009 crisis. Much of the rise of “must” appears in 2012, as relative to 2011 the occurrence of the term grew by 79%.

Note: Data downloaded on October 18, 2017 from https://quantgov.org/.

The figure below depicts the time paths of the occurrence of the five terms within Federal Reserve regulatory restrictions. The Federal Reserve has the most regulatory restrictions among the three regulators, as I showed in the previous post, and again “must” takes the lead.

Note: Data downloaded on October 18, 2017 from https://quantgov.org/.

The figure below depicts the time paths of the occurrence of the five terms within FDIC regulatory restrictions. As with the OCC, much of the rise of “must” appears in 2012, as relative to 2011 the occurrence of the term grew by 57%.

Note: Data downloaded on October 18, 2017 from https://quantgov.org/.

Lastly, for the adjusted measure of Title 12 regulatory restrictions, “shall” remains the term that appears most frequently, although “must” has closed the gap. Much of the rise of “must” appears in 2012, as relative to 2011 the occurrence of the term grew by 54%.

Note: Data downloaded on October 18, 2017 from https://quantgov.org/.

As in the previous post, overall there does not seem to be any evidence of deregulation, in the sense of sustained reductions in the number of regulatory restrictions embodied in the parts of the CFR that cover banks and banking. Stay tuned for future posts.