Lynch & Associates

Banking Regulatory Reform Bulletin

On March 14th the U.S. Senate passed the Regulatory Reform Bill (S. 2155) drafted by the Senate Banking Committee and designed to rewrite parts of the Dodd-Frank Act of 2010,including raising the generally applicable statutory threshold for enhanced prudential standards (“EPS”) from $50 billion to $250 billion in total consolidated assets while contemporaneously providing targeted relief to regional banks, community banks and credit unions with $10 billion or less in assets. With respect to the targeted relief to regional banks, community banks and credit unions with $10 billion or less in assets, we offer the following executive summary of the key relief provisions:

• End stress tests entirely
• Simplify capital calculations and leverage ratios
• Provide exemption from the Volcker Rule which would otherwise prohibit certain kinds of proprietary and/or speculative investments and could limit their ability to legitimately hedge risk
• Extend Qualified Mortgage designation for mortgages held in investment portfolio thereby encouraging lending to prospective homebuyers
• Deliver relief from credentialed appraiser requirements for smaller ($400,000 or less), higher risk mortgages in rural areas
• Eliminate escrow requirements
• Institute longer exam cycles
• Provide charter flexibility for federal thrifts

At this point the measure will move on to the U.S. House of Representatives where the Chairman of the House Committee on Financial Services, Jeb Hensarling (R-TX), and other representatives plan to propose a series of amendments. If the House passes a version of the Bipartisan Banking Bill that differs from the Senate version, these differences would have to be reconciled in conference and sent back to both chambers for passage.

The significance of this Bipartisan Regulatory Reform Bill was well articulated by the American Bankers Association President and CEO Rob Nichols when he stated, “This bill is an important step in right-sizing the rules for America’s banks, and it will allow financial institutions to better serve their customers and communities while maintaining safety and soundness.”