The best way to grow the nation’s economy is to reset federal banking regulations, according to the Regional Bank Coalition (RBC), which includes CEOs from companies such as SunTrust, Discover, Citizens, Capital One, PNC, BB&T, Bank of the West, TD Bank, and American Express.
RBC members currently face the same strict regulations placed on Wall Street megabanks with total consolidated assets of $50 billion or more. RBC says its members do not belong in the same category, which was designed to catch those megabanks that posed a “too big to fail” threat to the country.
In an April 13 letter to lawmakers, RBC reiterated support for the Systemic Risk Designation Improvement Act, previously advanced in the U.S. House of Representatives by Rep. Blaine Luetkemeyer (R-MO), a bipartisan bill that would eliminate the $50 billion asset threshold and amend the Dodd-Frank Wall Street Reform and Consumer Protection Act.
Instead, the coalition advocates for a multi-factor system that would look at a bank’s business model and activities, not just its assets.
“Size alone is not an accurate measure of an institution’s risk level and does not make the financial system safer nor sounder,” Matt Well, spokesman for RBC, said. “Examining the full picture, including a bank’s activities, asset types, and interconnectedness, is a more strategic and accurate means to measuring and mitigating risk in the financial ecosystem.”
Basing the current regulatory environment on an arbitrary asset threshold has forced many financial institutions to direct their resources away from lending and toward compliance, according to RBC. For instance, RBC said that the current “improperly calibrated regulatory environment” has made it more difficult for regional banks to lend and help their communities grow.
“Treating regional banks, which serve as the backbone of the economy by focusing primarily on community and commercial lending, in the same manner as the more risk-sensitive Wall Street banks means there are less resources for Main Street,” Well said.
Specifically, RBC’s letter was its response to a request from the Senate Banking, Housing and Urban Affairs Committee Chairman Mike Crapo (R-Idaho) and and Ranking Member Sherrod Brown (D-Ohio), who have asked for legislation that would boost economic growth and are seeking a possible bipartisan bill.
The 2016 version of Luetkemeyer’s bill could be a contender. With five Republican and four Democratic cosponsors, the version passed the House in December 2016 with a 254-161 vote.
On the House side this session, the Financial Services Committee also seeks similar industry reforms and GOP members already have taken aim to repeal the Dodd-Frank Act and shutter the Consumer Financial Protection Bureau created under it.