U.S. Rep. Blaine Luetkemeyer (R-MO) introduced this week the Systemic Risk Designation Improvement Act, which 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 threshold for designation of a bank holding company as a SIFI with a series of standards that, the bill’s author said, more accurately measure systemic importance.
More specifically, 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.
“An inefficient regulatory system based on an arbitrary threshold can have real economic consequences. Last Congress, my colleagues recognized the importance of this issue when the House of Representatives passed similar legislation with bipartisan support. I look forward to ushering in a regulatory regime that more effectively and thoughtfully safeguards against risk,” Luetkemeyer said.
He introduced the bill in both the 113th and 114th Congresses with House passage last Congress.
“This legislation supports economic growth throughout the country because it will free commercial banks to make loans while allowing financial regulators the ability to apply enhanced standards on banks based on actual risk posed to the financial system – rather than on arbitrary asset size alone,” Luetkemeyer added.