The Regional Bank Coalition (RBC) sent a letter to Rep. Blaine Luetkemeyer to express its support for his bill, the Systemic Risk Designation Improvement Act of 2017.
The bill would change the criteria for determining a Systemically Important Financial Institution (SIFI). Currently, the designation is based on asset size alone. This legislation would replace the $50 billion thresholds for designation of a bank holding company as a SIFI with a series of standards that more accurately measure systemic importance.
The bill would require the Federal Reserve to 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.
“Asset thresholds fail to accurately capture the risk an institution presents to the financial system. Even
worse, these inappropriately tailored regulations hinder the consumer and commercial lending
that boosts the U.S. economy,” RBC officials wrote to Luetkemeyer. “Regional banks operate as Main Street banks that focus on serving the banking and financial services needs of American consumers, small- and mid-size businesses, and state and municipal governments. Our institutions have relatively uncomplicated organizational structures and limited trading, derivatives and foreign operations, which limits our risk to the financial system. This is seen in the systemic scores of our institutions, calculated based on the test the Financial Stability Board and Basel Committee use for international regulations.”
They added that the current regulatory system reduces capital for lending, which hurts economic growth.
“It is clear we must reform the current system to better capture risk to the financial system,” RBC officials concluded. “While we disagree with the Congressional Budget Office’s scoring methodology, we support the offset outlined in the bill. For this reason, we support the thorough, data-driven H.R. 3312 and look forward to advancing the legislation, as it would lead to relief for regional banks and spur capital lending to small businesses and, therefore, Main Streets around the country.”