Senate Passes Banking Bill Providing Dodd-Frank Relief
The U.S. Senate on March 14 passed S.2155, the Economic Growth, Regulatory Relief, and Consumer Protection Act (the Act), by a vote of 67 to 31. Although the Act would not make the sweeping changes to the Dodd-Frank Act found in the Financial CHOICE Act of 2017 (CHOICE Act), it, nevertheless, would provide financial institutions welcome relief from a number of specific Dodd-Frank provisions.
Representative Jeb Hensarling, Chairman of the House Financial Services Committee, has indicated that further negotiations between the House and Senate must take place before the House votes on the Act. House Speaker Paul Ryan has taken a more conciliatory tone, commenting on the need for common sense bipartisan solutions in the final bill. As a result, while a final bill can be expected to include changes to the Act, it is unclear how substantial those changes will be. Assuming a final bill signed by President Donald J. Trump retains many, if not most, of the Act's provisions, the Act should positively impact both smaller and larger financial institutions. The Act would make a number of changes to provisions of Dodd-Frank and other federal laws regarding consumer mortgages, credit reporting, and loans to veterans and students.
The Act would also reduce the regulatory burdens on financial institutions—particularly financial institutions with total assets of less than $10 billion. Bank holding companies with up to $3 billion in total assets would be permitted to comply with less restrictive debt-to-equity limitations instead of consolidated capital requirements. This change should promote growth by smaller bank holding companies, organically or by acquisition. Larger institutions should benefit from the higher asset thresholds that would apply to systemically important banks subject to enhanced prudential standards. The higher thresholds may lead to increased merger activity between and among regional and super regional banks.
Although the banking industry can be expected to view the Act positively should it become law, it falls short of the CHOICE Act in several important respects. The CHOICE Act would:
reduce regulatory burdens on institutions based on capital levels irrespective of asset size
reduce the Financial Stability Oversight Council's powers
repeal Dodd–Frank's orderly liquidation authority, and
scale back the CFPB's powers.