The House Financial Services Committee approved a bill last week that would prohibit federal agencies from requesting a financial institution to terminate a banking relationship unless the regulator has a valid reason.
The Financial Institution Customer Protection Act of 2017 (H.R. 2706), sponsored by Rep. Blaine Luetkemeyer (R-MO), would effectively end an initiative instituted by the Department of Justice (DOJ) under the Obama Administration dubbed Operation Choke Point. This policy allowed the DOJ to investigate banks who do business with firearm dealers, payday lenders, and other companies believed to be at higher risk for fraud and money laundering.
Under the Luetkemeyer bill, banks cannot be asked to terminate relationships based on reputational risk, rather, it must be for a material reason.
The committee passed another Luetkemeyer measure, H.R. 3312, which would change the standard for designating a bank holding company as a Systemically Important Financial Institution (SIFI).
The Systemic Risk Designation Improvement Act proposes to replace the $50 billion threshold with a series of standards to measure systemic risk. The legislation requires that the Federal Reserve review an institution’s size, interconnectedness, substitutability, global cross-jurisdictional activity, and complexity before determining whether that institution should be subject to the full SIFI regulatory regime.
“Over the past few years, the House Financial Services Committee has expressed bipartisan support regarding both pieces of legislation that were passed today,” Luetkemeyer said. “The purpose of the legislation is simple – it aims to provide greater transparency and accountability by the government.”