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U.S. changes from the top
By Aaron Cutler
On Tuesday, March 6, the Senate voted 67 to 32 to move Senate Bill 2155, the Economic Growth, Regulatory Relief & Consumer Protection Act (the “Senate Bill”) toward debate. While the vote does not guarantee the passage of the Senate Bill, it looks very likely that the Senate will approve the bill.
Even though the Senate Bill is not yet law and is still subject to change, there are several provisions that banks should be aware of, depending on their status.
Large banks should be aware that the asset threshold for designation as a systemically important financial institution (SIFI) will be raised from $50bn to $250bn. Additionally, the Federal Reserve will develop separate prudential standards for those institutions with between $100bn and $250bn in total assets, which can be individually tailored to the institution.
Smaller banks, with $10bn or less in total assets, should be aware that a potential “regulatory off-ramp” that exempts institutions from certain federal laws, rules and regulations regarding capital and liquidity requirements if the institution maintains a certain capital threshold. However, the institution’s primary federal regulator may determine it cannot utilize this off-ramp due to its risk profile, especially if the institution’s off-balance sheet exposures. Smaller banks should also be aware that the Volcker Rule will not be applied to institutions with $10bn or less in total asses whose total trading assets and liabilities do not exceed 5% of their total assets. There will also be relief from the Qualified Mortgage requirements for institutions that hold the mortgages on their books rather than those that securitize and sell them. Furthermore, the asset threshold for the Federal Reserve’s Small Bank Holding Company Policy Statement will be raised from $1bn to $3bn.
