On March 14, 2018, the United States Senate passed the most significant piece of regulatory reform legislation for community financial institutions in nearly a decade. The Economic Growth, Regulatory Relief and Consumer Protection Act (S. 2155) passed the Senate by a strong, bipartisan vote of 67 to 31.
Since the passage of the Dodd-Frank Act, members of Congress on both sides of the aisle have worked to reach consensus on how to provide relief for smaller financial institutions from regulations that were meant for the biggest, most complex institutions, while also ensuring a safe financial system. Before the final vote on passage, Sen. Mike Crapo (R-ID), chairman of the Senate Committee on Banking, Housing, and Urban Affairs, remarked that the nation was about to witness a “rare, bipartisan moment that had been years in the making,” adding, “this bill is a bipartisan compromise, the changes are commonsense, and it will allow financial institutions to better serve their customers and communities, while maintaining safety and soundness and important consumer protections. This is good for small financial institutions, good for small business, and good for families across America.”
The bill amends the Bank Holding Company Act of 1956 to exempt banks with assets valued at less than $10 billion and total trading assets and liabilities not exceeding more than 5 percent of their total assets from the “Volcker Rule,” which prohibits banking agencies from engaging in proprietary trading or entering into certain relationships with hedge funds and private-equity funds. Certain banks with less than $10 billion in total assets are also exempted by the bill from specified capital and leverage ratios, with federal banking agencies directed to promulgate new requirements. The legislation also would raise the asset threshold for bank holding companies to be designated as systemically important financial institutions (“SIFIs”) from $50 billion to $250 billion, while authorizing the Federal Reserve to “apply any prudential standard to any bank holding company or bank holding companies” with total assets of at least $100 billion. The Federal Reserve also would be authorized to apply special standards to bank holding companies with assets less than $100 billion. The legislation also calls for exempting banks and credit unions that provide fewer than 500 mortgages a year from having to report on a series of expanded data points required by the Home Mortgage Disclosure Act (HMDA), among other things.
Rep. Jeb Hensarling (R-TX), chairman of the House Financial Services Committee, has stated that the House of Representatives will not pass this legislation without additional provisions that would further relax regulations. In a statement following passage of the Senate bill, the White House said President Trump “looks forward to discussing any further revisions the House is interested in making, with the goal of bipartisan, pro-growth Dodd-Frank relief reaching his desk as soon as possible.”
If passed by the House and signed by the President, the Economic Growth, Regulatory Relief and Consumer Protection Act would reduce the money and resources smaller lenders currently spend on compliance, which could provide them opportunities to focus on innovation, which could present competitive pressure for fintech companies or provide increased opportunities and incentives for banks and fintech companies to forge partnerships.
Stay tuned for further developments!