Banking and Finance Law Daily Senate regulatory reform proposal draws praise and criticism
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Tuesday, November 14, 2017

Senate regulatory reform proposal draws praise and criticism

By Andrew A. Turner, J.D.

Senate Banking Committee members and industry groups have weighed in with support and opposition to proposed legislation that would change the financial regulatory framework. Senate Banking Committee members reached bipartisan agreement on legislation that would raise the threshold for applying enhanced prudential standards to bank holding companies from $50 billion to $250 billion. The regulatory relief package also includes consumer protections for veterans, senior citizens, and victims of fraud (see Banking and Finance Law DailyNov. 13, 2017).

The agreement was announced by Senate Banking Committee Chairman Mike Crapo (R-Idaho) and Banking Committee members Joe Donnelly (D-Ind), Heidi Heitkamp (D-ND), Jon Tester (D-Mont), and Mark Warner (D-Va). Crapo said that the proposals would "foster economic growth by right-sizing regulation, particularly for smaller financial institutions and community banks."

Senator reaction. Senator Sherrod Brown (D-Ohio), Ranking Member of the Senate Banking Committee, questioned the wisdom of legislation "rolling back so many of Dodd-Frank’s protections" while banks made "record profits last year." Senator Bob Corker (R-Tenn), a member of the Senate Banking Committee, countered that the reforms will ease the regulatory burden that Dodd-Frank created for community banks. Similarly, Sen. Thom Tillis (R-NC) commented that "Dodd-Frank’s harmful one-size-fits-all model" has restricted access to capital with burdensome regulations.

Senator Tom Cotton (R-Ark) applauded the agreement, which includes the PACE Act, legislation Cotton introduced earlier this year that requires Truth in Lending Act disclosure for Property Assessed Clean Energy (PACE) loans that target low-income and elderly Americans with predatory home loans.

Industry comments. Marcus Stanley, policy director atAmericans for Financial Reform, worried that the proposal strips away mandates to maintain regulatory oversight and "opens the door for Trump-appointed regulators to severely weaken the rules applying to large regional banks." On the other hand, Rob Nichols, American Bankers Association president and CEO, welcomed the regulatory reform legislation for including mortgage rule changes, longer examination cycles for community banks, charter flexibility for federal savings associations, and stress test relief.

While urging Congress to continue working toward policies which consider risk rather than arbitrary asset thresholds, the Consumer Bankers Association and Financial Services Roundtable saw the agreement as an important step forward by giving the Federal Reserve Board flexibility to make a more complete assessment when designating certain institutions systematically important.

The Independent Community Bankers of America expressed its support for a legislative agreement that included ICBA-advocated provisions to increase exemption thresholds for Home Mortgage Disclosure Act reporting, provide "qualified mortgage" status for portfolio mortgage loans at most community banks, expand eligibility for the 18-month regulatory examination cycle, and ease appraisal requirements to facilitate mortgage credit in local communities.

Meanwhile, the U.S. Chamber of Commerce’s Center for Capital Markets Competitiveness, offered a series of recommendations to revitalize small business lending. The "Financing Main Street Agenda" includes five core recommendations: replace asset thresholds with multifactor risk assessments; reduce the burden of stress testing and capital planning while preserving benefits; harmonize U.S. capital and liquidity rules with international standards; reassess the Volcker Rule; and improve the regulatory process.

Companies: American Bankers Association; Americans for Financial Reform; Consumer Bankers Association; Financial Services Roundtable; Independent Community Bankers of America; U.S. Chamber of Commerce

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