Rep. Blaine Luetkemeyer is set to introduce legislation with bipartisan support Wednesday that would give regulatory relief to regional banks, which are being regulated in some ways as if they were Wall Street megabanks, yet have more in common with community banks.
The bill from the Missouri Republican would determine which banks need stepped-up Federal Reserve oversight based on an assessment of how risky they are, rather than the current one-size-fits-all $50 billion asset threshold in force today.
Such an approach has support from both the Trump administration and regulators.
Banks such as Atlanta-based SunTrust, with $201 billion in assets, and Cincinnati-based Fifth Third Bank, with $138 billion, could be in line to escape many of the new post-crisis rules under the legislation.
Luetkemeyer, who is chairman of the House Financial Services Committee’s subcommittee on financial institutions, said he would introduce the bill Thursday and that it would be marked up after Congress’ August recess. It is expected to have the co-sponsorship of conservative members of the Republican caucus and centrist Democrats.
“This is an alternative we’ve come up with that basically all the parties that are involved are OK with,” Luetkemeyer said Wednesday.
His legislation would do away with the $50 billion cutoff in favor of having banks that are threats identified by the Financial Stability Oversight Council, a super-group of the top financial regulators that has the power to tag any firm as a potential risk to the system and have it regulated by the Federal Reserve.
In this year’s version of the bill, Luetkemeyer said, the council would designate companies based on a metric of riskiness maintained by the Fed that distills a set of factors down to a single number. Those factors include not just size but also a bank’s activities and connectedness to other banks.
“We think that’s the much more efficient way about going about it,” the Republican said.
Megabanks such as Citigroup, JPMorgan Chase and Bank of America would continue to face the highest level of scrutiny under the bill.
In its Treasury report on financial principles published in June, the Trump administration endorsed ditching the $50 billion cutoff in favor of tailoring regulation to specific risks posed by banks.
And in testimony to the Senate last week, Fed Chairwoman Janet Yellen suggested that she was open to legislation along the lines of Luetkemeyer’s. “An approach based on business model or … factors is also a workable approach from our point of view,” Yellen said.
Nevertheless, some Democratic advocates of tighter financial regulation, such as Massachusetts Sen. Elizabeth Warren, have indicated resistance to changing the rules for regional banks.
Luetkemeyer said Wednesday that he did not have a partner to introduce his bill in the upper chamber.
In June, House Republicans passed sweeping legislation to roll back the 2010 Dodd-Frank rule that would lessen the burdens of regulations and curbed the power of the Financial Stability Oversight Council. That bill, however, is expected to not have a chance in the Senate. Luetkemeyer’s bill, the Systemic Risk Designation Improvement Act, would be an alternative vehicle for relief for midsize banks.
