U.S. Treasury Releases Report on Revamping Financial Regulation

The 149-page report released June 12 titled "A Financial System that Creates Economic Opportunities" is the product of a four-month review that could be a road map for changes over the next several years by the regulatory agencies and Congress. Click here to download a copy of the report. The Treasury believes the majority of the recommendations can be implemented through the banking agencies without congressional action. In the coming weeks we all will have a better idea of its contents and the possible impact on Congress. But we do know community banking is a focus to provide relief, such as exempting community banking from Basel III and possibly an exemption from the Dodd-Frank Collins amendment on minimum capital which would positively impact the treatment of mortgage servicing assets and certain types of real estate loans. The report recommends the small bank policy statement asset threshold be increased from $1 billion to $2 billion; makes changes to the Consumer Financial Protection Bureau's ATR/QM rule; raises the threshold for making small creditor loans from the current $2 billion to something between $5 billion and $10 billion; exempts community banks from the Volcker rule; possibly changes the reserves resulting from Current Expected Credit Loss being all or in part counted as capital; simplifies the chartering of new banks; among others. CFPB is not eliminated, but the director would serve at the pleasure of the President and be subject to congressional appropriation, both being in the CHOICE Act. Community Development Financial Institutions and minority-owned banks could see capital raising flexibility measures.  

There is reference to regulatory restructuring but it is vague, not clear as to what it means or if it will be a priority compared to other items that are more focused on enhancing economic growth. Certainly we will be on alert to any threat to the dual banking system. Wall Street seems to have done well with these recommendations that would weaken the capital and liquidity requirements that have been put in place to strengthen these largest of institutions. LBA's Washington Visit on July 18-20 will be an opportunity for Louisiana bankers to continue to push and highlight needed changes with our congressional delegation and the agencies that will be such a critical part of implementing the needed changes for community banking. Please be a part of this important work.