A Timeline of Important Banking Regulation

A Timeline of Important Banking Regulation

May 10, 2017: BAUERFINANCIAL, Inc., Coral Gables, FL, the nation’s leading independent bank and credit union rating firm, compares two banking bills currently working their way through Congress. One was introduced in the House of Representatives last September and passed the House Financial Services Committee on Thursday, May 4, 2017. The other was introduced in the Senate last month and has not gone any further as of yet. Both bills are aimed at reducing unnecessary regulatory burden for community banks and reigning in some of the risky behavior of large, systemically important banks. And both bills seek to end Too Big to Fail and bank bailouts. That is where the similarities end.

The House Bill: The Financial CHOICE Act of 2016 (H.R.5983), introduced by Rep. Jeb Hensarling (RTX) and co-sponsored by Reps. Scott Garrett (R-NJ), Randy Neugebauer (R-TX), Blaine Luetkemeyer (RMO), Bill Huizinga (R-MI) and Sean Duffy (R-WI), is a sweeping overhaul of Dodd-Frank and basically starts from scratch as if this were 2008 all over again.

The Senate Bill: The 21st Century Glass-Steagall Act of 2017 (S.881) is a bipartisan bill Introduced by Senator Elizabeth Warren (D-MA) and co-sponsored by Senators John McCain (R-AZ), Maria Cantwell (D-WA), Angus King (I-ME), Kirsten Gillibrand (D-NY) and Bernie Sanders (I-VT). While it does reinstate certain Glass-Steagall Act protections that were repealed by the Gramm-Leach-Bliley Act, the scope of the Senate Bill is much more limited.

In addition to these two bills, the Trump administration, along with community bankers, is favoring a two -tiered regulatory system. Instead of forcing the big, complex banks to divest their non-banking activities, like Senator Warren proposes, or revamping the entire Dodd-Frank Act, as Rep. Hensarling suggests, the largest banks (those with $10 billion or more in total assets) would be subject to more stringent oversight and capital requirements than their smaller counterparts.

With heavy-hitters on all sides, each with their own valuable input, expect some form of compromise. Perhaps allowing some forms of investment banking if they do not present any conflict of interest to the bank’s customers and if the bank maintains a minimum leverage capital ratio of 10%.

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