Senate Banking Committee Advances Bill to Ease Banking Regulations

The U.S. Senate Banking Committee voted to advance a bill intended to "modernize regulations in a way that makes sense for small financial institutions, benefitting consumers and encouraging economic growth." 16 of the 23 Committee members voted to advance the bipartisan bill, which was sponsored by Committee Chair Mike Crapo (R-ID) and cosponsored by 19 additional Republican and Democrat Senators.

The "Economic Growth, Regulatory Relief and Consumer Protection Act" includes various provisions (see this section-by-section summary) aimed at providing regulatory relief and tailoring regulations for institutions based on consolidated assets. The bill would:

• Raise the threshold for enhanced prudential standards from $50 billion to $250 billion.
• Require banking agencies to amend the supplementary leverage ratio ("SLR") rule to exclude funds of a custodial bank that are deposited with a central bank from the SLR calculation.
• Require banking agencies to establish a community bank leverage ratio of tangible equity to average consolidated assets of not less than eight percent and not more than ten percent. Banks with less than $10 billion in assets that maintain tangible equity exceeding the community bank leverage ratio would be considered compliant.
• Exempt from the Volcker Rule community banks with (i) less than $10 billion in total consolidated assets and (ii) trading assets and liabilities totaling not more than five percent of total consolidated assets.
• Permit certain funds to share a name (other than the bank's name) with their affiliated investment adviser.
• Reduce reporting requirements for smaller banks.
• Raise the consolidated asset threshold of the Federal Reserve Small Bank Holding Policy Statement from $1 billion to $5 billion.
• Raise the consolidated asset threshold from $1 billion to $3 billion for well-managed and well-capitalized banks to qualify for an 18-month examination cycle.
• Expand the ability of banks to treat certain municipal obligations as high-quality liquid assets.

In addition, the bill includes numerous provisions aimed at improving access to mortgage credit while providing added protections for veterans, consumers, and homeowners. Finally, the bill would require the (i) Treasury Department to submit a report to Congress on cybersecurity risks in the financial system, (ii) SEC to submit a report to Congress on risks and benefits of algorithmic trading, and (iii) Government Accountability Office to conduct studies on various aspects of the consumer reporting industry.