GOP Senators Press Agencies to Loosen Regulations

Mike Sorohan msorohan@mba.org

August 06, 2019


A group of Republican senators, mostly from the Senate Banking Committee, sent a letter to federal agencies urging them to continue to relax banking regulations.

The letter, led by Banking Committee Chairman Mike Crapo, R-Idaho, said S. 2155, the Economic Growth, Regulatory Relief and Consumer Protection Act, has already produced meaningful benefits, and urged the agencies to loosen regulations to provide continued support of the economic expansion.

"S. 2155 was enacted to right-size regulations for community banks, mid-sized banks, regional banks and credit unions to expand access to capital," the letter said. "We have already started to see meaningful benefits from these laws...more can still be done to support the economic expansion."

The letter notes the number of banks continues to decline in the aftermath of the financial crisis. Since first quarter 2009, the number of banks has fallen by nearly 35 percent; the number of community banks in that period declined from 7,416 to 4,930, according to the Federal Deposit Insurance Corp.

"This long-standing trend has only accelerated since the enactment of the Dodd-Frank Act, which applied one-size-fits-all regulation to financial institutions," the letter said.

The letter urged the agencies--the Federal Reserve; the Office of the Comptroller of the Currency; and the FDIC--to consider several "critical" issues, including:

--Simplify risk-based capital requirements by revising the Community Bank Leverage Ratio to 8 percent. "[This] would result in community banks receiving relief under the CBLR while maintaining significant capital," the letter said. "This approach would be consistent with law and continue to set a high bar for the amount and quality of equity capital held by community banks."

--Continue to explore additional opportunities to reduce the regulatory reporting burden for community banks.

--Continue to actively analyze the effects of regulatory capital and lending, particularly during a downturn.

--Simplify the Agencies' recent proposed rule implementing Section 619 of Dodd-Frank, which excludes community banks with less than $10 billion in assets that do not engage in any meaningful trading activity, by eliminating the proposed accounting prong and revising the "covered funds" definition's overly broad application to venture capital, other long-term investments and loan creation, to improve market liquidity and preserve access to diverse sources of capital for businesses.

--Make a targeted change to its margin rules to provide a full exemption from initial margin requirements, consistent with transactions between affiliated entities governed by the Commodity Futures Trading Commission.

--Simplify the Federal Reserve's stress testing regime for institutions with total assets between $100 billion and $250 billion in accordance with Section 401 of S. 2155.

--Encourage following the Congressional Review Act and submit all rules to Congress, even if they have not gone through a formal notice and comment rulemaking; and provide clarity about applicability of guidance.

"It is incredibly important that these issues be addressed over the next year and we encourage you to provide us with regular updates on your progress," the letter said.

The letter's signers include Crapo and Sens. Richard Shelby, R-Ala.; Patrick Toomey, R-Pa.; Tim Scott, R-S.C.; Ben Sasse, R-Neb.; Tom Cotton, R-Ark.; Mike Rounds, R-S.D.; David Perdue, R-Ga.; Thom Tillis, R-N.C.; John Kennedy, R-La.; Martha McSally, R-Ariz.; Jerry Moran, R-Kan.; and Kevin Cramer, R-N.Dak.

Share this article