‘Commonsense fixes’ to Financial Rules are Aim of New Bipartisan McCaskill-Perdue Bill
Legislation eases unnecessarily overly-burdensome ‘Dodd-Frank’ regulations on regional banks
WASHINGTON – Bipartisan legislation from U.S. Senators Claire McCaskill (D-Mo.) and David Perdue (R-Ga.) is aimed at “commonsense fixes” to financial rules, providing regulatory relief to small regional banks subject to unnecessarily overly-burdensome regulations put in place by the “Dodd-Frank” financial reform bill—rules that were never intended for banks that primarily engage in ordinary consumer banking practices.
The bill serves as the Senate companion to legislation from Missouri Congressman Blaine Luetkemeyer, who shepherded the legislation to passage in the U.S. House last year.
“When even some of the architects of ‘Dodd-Frank’ agree the law is unnecessarily burdensome on regional banks, you know we’ve got a problem on our hands,” McCaskill said. “This is a commonsense fix that’ll untie the hands of our small regional banks and return to them the flexibility to lend to Missouri customers who want to buy a house, or start a business. I’m glad to join Congressman Luetkemeyer’s efforts to help get this bill across the finish line in the Senate.”
“Regional banks offer a lifeline to small businesses and entrepreneurs looking to create jobs,” Perdue said. “Dodd-Frank overregulated these banks by placing them into the same category as huge banks with a global reach. This sent these banks’ compliance costs through the roof and limited their ability to do what they do best—support their communities. This legislation would actually test banks for systemic risk rather than forcing banks to comply with an arbitrary figure.”
The Senators’ legislation would help lower the regulatory burden on regional banks, by giving the Federal Reserve the flexibility to exempt them from certain Dodd-Frank rules that currently limit their lending ability. Currently under the Dodd-Frank law, passed in the wake of the 2008 financial crisis, banks with assets over $50 billion are all subject to stronger regulations.
While eight of these banks are large enough to be designated Global Systemically Important Banks (G-SIBs), where their stability is of global concern, nearly all the other banks are regional banks, most of which have a fairly limited impact on the U.S. banking system outside of the states where they have a large presence, and engage in primarily ordinary consumer banking practices. This arbitrary threshold for regional banks is one that everyone from former congressman Barney Frank to Federal Reserve Board governors have criticized.
Under this legislation, banks over the $50 billion threshold that are not the eight institutions designated as global systemically important banks would be exempt from the several Dodd-Frank rules, including overly-burdensome reporting requirements, and limitations on mergers and acquisitions, if the Federal Reserve decides that the institution does not pose a risk to the financial system.