Measure would raise asset threshold for 'SIFI' banks to $250 Billion after 18 months, among other provisions; Crapo turned to moderate Dems after talks with Brown failed.

Senate Banking Committee Chairman Mike Crapo (R-ID) on November 13, 2017, announced that he had reached agreement with a number of Democrats on a bipartisan package of regulatory relief measures intended to ease rules for smaller financial institutions and promote economic growth. Many of the provisions would relax capital, leverage and mortgage rules imposed by the 2010 Dodd-Frank Act. Notably, the bill would raise Dodd-Frank's $50 billion asset threshold, above which banks are subjected to enhanced prudential standards, to $100 billion upon enactment and further raise the threshold to $250 billion 18 months after enactment, while giving the Federal Reserve authority to re-impose the more severe prudential regime and conduct stress tests on banks with assets between $100 billion and $250 billion.

Chairman Crapo began to negotiate with moderate-leaning Democrats on the committee last week, after Ranking Member Sherrod Brown (D-OH) announced that negotiations with Crapo on a relief package had broken off.

Attached with this Alert please find a PDF with a section-by-section summary of the agreement (4 pages) and a press release from the Banking Committee. The committee said that legislative text for the package is not yet completed.

A press release announcing the agreement listed eight Democrats and an Independent as cosponsors, which would provide enough support to surmount a filibuster on the Senate floor — presuming all of the chamber's Republicans were to vote for cloture on the bill. The Democrats listed were Joe Donnelly (IN), Heidi Heitkamp (ND), Jon Tester (MT), Mark Warner (VA), Tim Kaine (VA), Joe Manchin (D-WV), Claire McCaskill (D-MO), and Gary Peters (D-MI), along with Independent Angus King of Maine. In addition to Chairman Crapo, the Republicans cosponsoring the bill were Bob Corker (TN), Tim Scott (SC), Tom Cotton (AR), Mike Rounds (SD), David Perdue (GA), Thom Tillis (NC), John Kennedy (LA) and Jerry Moran (LA).

The Banking Committee could schedule a markup of the package in the weeks after the Thanksgiving break.

Provisions on mortgage rules, Volcker Rule, SIFI asset threshold. The summary includes titles on mortgage credit (including provisions on the definition of a "qualified mortgage," appraisals, escrow requirements and manufactured homes); consumer access to credit (including items establishing a new leverage ratio for community banks, allowing more banks to qualify for the 18-month exam cycle, and exempting certain smaller banks from Dodd-Frank's Volcker Rule on proprietary trading); protections for veterans, consumers and homeowners; and tailoring of rules for certain bank holding companies. This last section, Title IV, includes a provision sought by banks that would direct regulators to classify certain investment-grade, liquid and "readily marketable" municipal securities as level 2B liquid assets under the Dodd-Frank Liquidity Coverage Ratio.

According to the staff summary, Title IV also includes a key provision immediately exempting banks with total consolidated assets of between $50 billion and $100 billion from Dodd-Frank's enhanced prudential standards, which now apply to any bank with at least $50 billion in assets. Holding companies with assets between $100 billion and $250 billion would also be exempt 18 months after the bill's enactment, but the Fed would: "1) have the authority to apply enhanced prudential standards [on those banks] after the effective date, 2) be required to conduct a periodic supervisory stress test after the effective date, and 3) have the authority to exempt firms from enhanced prudential standards prior to the effective date."

Chairman Crapo said, "The bipartisan proposals on which we have agreed will significantly improve our financial regulatory framework and foster economic growth by right-sizing regulation, particularly for smaller financial institutions and community banks." Sen. Warner said the announcement "is the result of years of tough, bipartisan negotiations. The goal is simple: to help Main Street by rolling back unnecessary and burdensome regulations on credit unions and small community banks while ensuring that large Wall Street banks remain subject to the rules I helped put in place after the financial crisis to prevent another meltdown."

Sen. Donnelly said the package "is an example of what we can achieve when we work together, and the result of good-faith negotiations with Chairman Crapo and Sens. Tester, Warner and Heitkamp."

Ranking Member Brown said in a separate statement, "I understand my colleagues' interest in agreeing to this legislation, but disagree on the wisdom of rolling back so many of Dodd-Frank's protections with almost no gains for working families. Banks made record profits last year and it looks like executives will get bigger bonuses this year. Hourly wages have stagnated for 40 years, and too many Americans are still feeling the impact of the 2008 financial crisis. Who needs help the most?"

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ATTACHMENTS

Economic Growth Bill

Crapo Press Release