A group of seven Republican senators is calling on the Federal Reserve to provide immediate regulatory relief for regional banks that do not pose a systemic risk to the financial system, while better tailoring its supervision of banks with more than $250 billion in assets as well as international banks with substantial US operations. On August 17, the group, led by Senator David Perdue (R-GA), a member of the Senate Banking Committee, sent a letter to Randal Quarles, the Fed's vice chairman for supervision. In it, they expressed the following concerns about implementation of the bank deregulation bill that became law this May (which Perdue refers to colloquially as the Dodd-Frank Relief Act):
- Enhanced prudential standards for mid-sized banks: The senators said it was their understanding the new law "shifted the assumption that financial companies with less than $250 billion are not systemically risky" and that they are thus "confused" by the Fed's continued imposition of Comprehensive Capital Analysis and Review (CCAR) stress tests and other enhanced supervision rules to banks with between $100 billion and $250 billion in assets. The law raised the trigger level for supervision from $50 billion to $100 billion, while granting relief to banks in the $100-$250 billion range within 18 months, but also included a "safety valve" allowing the Fed to maintain tougher regs on certain banks based on their risk profile. Quarles has previously stated that the Fed plans to establish a framework for determining which banks in that range remain subject to stricter scrutiny "much more rapidly" than the 18-month statutory deadline.
- Exempt non-systemic larger banks: The senators' letter also suggests that the Fed should use discretion under the new law to exempt certain regional banks with more than $250 billion in assets from stricter regulatory scrutiny. They said the liquidity coverage ratio should not be applied to non-systemically important regional banks the same way it is applied to global systemically important banks (G-SIBs), arguing that, "The law provided the Fed with the ability and responsibility to tailor the regulations applied to these companies."
- Comparable regulatory treatment for international banks: Finally, the senators said regulatory requirements imposed on the US operations of international banks – which represent 20 percent of total US banking system assets – should be proportional to their US asset size and risk profiles. "Consistent with the longstanding principles of national treatment and competitive equality," they wrote, intermediate holding companies of foreign banks "should receive comparable regulatory treatment to US BHCs of similar size and risk profile."