Regulatory Reform – Is it a Reality in 2018?

By Robert Smith

On March 15, 2018, the U.S. Senate took a major step in changing the landscape of financial regulation by passage of the Economic Growth Regulatory Relief and Consumer Protection Act, with a strong bipartisan vote of 67-31. Senate Bill 2155 represents the first significant revision to the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010. 

SB 2155 has generally received positive reviews as a bill focused on benefitting smaller institutions by targeting exemptions from a few regulations. Any criticism that the bill “deregulates” banks is unwarranted. 

The bill now heads to the House of Representatives for consideration. The likelihood of passage through the house without some significant modifications (or any time in the near future) remains unclear.

The highlights of SB 2155 of primary important to community banks include the following:

  • The bill could significantly change the impact of capital maintenance rules on community banks. A bank with consolidated assets of less than $10 billion could avoid any requirement to satisfy leverage capital requirements and risk-based capital requirements if it maintains a ratio of tangible equity to average total assets of at least 8 percent to 10 percent. The bank would also be deemed well-capitalized.
  • The bill would increase the threshold for qualification under the Federal Reserve “Small Bank Holding Company Policy Statement” by increasing the amount from $1 billion to $3 billion in total consolidated assets.
  • The bill would raise the asset threshold for publicly traded banks required to adopt a risk committee from $10 billion to $50 billion.
  • The bill would provide that mortgage loans are deemed to satisfy the "ability to repay" requirements, and there thereby be treated as qualified mortgages if the loans are originated by a bank with consolidated assets of less than $10 billion and held in the bank's portfolio.
  • The bill significantly increases the asset threshold for banking institutions subject to enhanced prudential standards under Dodd-Frank. These enhanced requirements generally focus on risk management, liquidity and capital, resolution planning and stress tests. The bill raises the threshold for applicability from $50 billion in total consolidated assets to $250 billion.

The information provided above is created by Attorney Robert Smith of Friday, Eldredge & Clark, LLP.  Robert is a partner in the firm’s Mergers and Acquisitions Practice Group. His diverse corporate practice focuses on representing individuals, companies, and financial institutions in general business, transactional, securities and regulatory matters. He has handled transactions in a variety of industries including the banking, healthcare, broadcasting, retail, manufacturing, real estate and technology industries.

his is not a substitute for legal advice and should be considered for general guidance only. For more information or if you have further questions, please contact one of our Banking and Finance attorneys.