CEOs representing regional banks wrote a joint letter to Senate Banking Committee leaders Sens. Mike Crapo (R-ID) and Sherrod Brown (D-OH) in support of a bill that would change the parameters for designating a bank as systemically important.
The Systemic Risk Designation Improvement Act of 2017 (S. 1893) – sponsored by Sens. Claire McCaskill (D-MO) and David Perdue (R-GA) — would exempt some banks not designated as systemically important from Dodd-Frank reporting requirements.
Currently, any financial institution with $50 billion in assets is deemed systemically important and faces stricter capital requirements and other regulations. This bill is designed to give the Federal Reserve flexibility when making systemic risk designations. It would effectively free many regional banks from these requirements. The criteria would not include just asset size, but other factors as well, such as interconnectedness, substitutability, global cross-jurisdictional activity, and complexity.
“This legislation uses the systemic risk measurement methodologies developed by the federal banking regulators to determine the actual risks particular firms present to the financial sector,” the CEOS wrote in the letter. “Such risk profiles would then form the basis for determining whether firms would be subjected to systemic risk regulation. We believe that dynamic, multifactored analyses provide the most accurate basis for making assessments for regulatory purposes and should be used accordingly.”
The letter was signed by the CEOs of Ally, Bank of the West, BB&T, BBVA Compass, BMO Financial Corp., Capital One Financial Corporation, Citizens Financial Group, Comerica, Discover Financial Services, Fifth Third Bancorp, Huntington, KeyBank N.A., M&T Bank, The PNC Financial Services Group, Regions Financial Corporation, Santander US, SunTrust, US Bank, and Zions Bancorporation.
“As regional banks, we play a critical role in our communities, serving as the backbone of economic growth by providing loans and other banking services to Main Street businesses,” the letter said. “We operate in all 50 states and are responsible for more than $1.7 trillion in lending to the local communities in which we operate. Regional banks hold one-quarter of U.S. banking deposits and employ more than 430,000 people in more than 23,000 banking offices throughout the country and have account or credit relationships with more than half of America’s households.”