On May 24, 2018, President Trump signed the Economic Growth, Regulatory Relief and Consumer Protection Act (S. 2155) into law, clearing the last hurdle for an expansive roll-back of U.S. banking regulations. The bill passed in the U.S. House of Representatives by a 258-159 vote and in the U.S. Senate with a 67-31 vote earlier this year. The bill will relieve a majority of the nation’s banks from compliance and regulatory obligations imposed by the 2010 Dodd-Frank Act, which was adopted in the aftermath of the 2008 financial crisis.
S. 2155 benefitted from significant support from the banking industry, and in particular from the Independent Community Bankers of America and other representatives of community banks. Proponents of the bill assert that the oversight and compliance obligations imposed by Dodd-Frank unnecessarily, or at least disproportionately, burden community banks with the costs and organizational challenges associated with compliance, even though these institutions do not pose the same level of risk to the domestic or global financial systems as their much larger national bank counterparts.
To address these concerns, S. 2155 adjusts existing regulatory requirements to create a more tiered regulatory framework based on institution asset size, primarily by (i) removing certain compliance obligations to which community banks are subject, and (ii) increasing the threshold triggering application of some of the most stringent oversight and compliance requirements. The most significant regulatory changes for community and regional banks resulting from S. 2155 are highlighted here:
The expansiveness of these reforms means a significant easing of U.S. bank regulations as they apply to community and regional banks. S. 2155 may soon be followed by further regulatory changes, as House Financial Services Committee Chairman Jeb Hensarling has voiced his intention “to build on the progress achieved [by S. 2155] with an additional package of bipartisan pro-growth capital formation provisions that the House and Senate will vote on soon.” Regardless of future congressional action, the post-S. 2155 regulatory landscape will be new and very different for many banking institutions, especially those far from Wall Street and doing business on Main Street.