News : DCUC Insights

The U.S. Federal Reserve Just Announced a Proposal That Relaxes Regulations on Medium Sized Banks

Wednesday, October 31, 2018  
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The Fed just announced a proposed rule that relaxes regulations on banks between $100 billion and $250 billion.  This would codify the changes in S 2155. 

Based on a quick read, all banks with between $100 billion and $250 billion in assets would be out from under enhanced capital and liquidity rules.  Further, they would only have to participate in the Fed's annual stress testing every two years, rather than annually.

Capital and liquidity rules would also be relaxed for banks above $250 billion. Most banks would be released from complying with "advanced approaches," which set risk management standards.  That’s apparently a big deal in terms of compliance burden for banks. 

It is important for DCUC members to note this deal for banks whenever someone writes an opinion complaining about credit union regulation relief efforts or when you are engaging your member of Congress. 

Stay tuned to DCUC for more information on our advocacy initiatives and we highly recommend attending our Defense Matters Forum on Sunday, March 10, 2019.  You will not be disappointed.

Read the full Reuters article below.

U.S. Federal Reserve unveils proposal to ease regulations for larger banks

WASHINGTON (Reuters) - The U.S. Federal Reserve unveiled a proposal on Wednesday that would ease regulations for banks with less than $700 billion in assets.

PNC Financial Corp (PNC.N), Capital One Financial Corp (COF.N), Charles Schwab (SCHW.N), and U.S. Bancorp (USB.N) would enjoy reduced liquidity and compliance requirements under the proposal, which the Fed board is set to vote on Wednesday morning. Several smaller banks would see further reduced regulation as the Fed implements changes ordered in a bank deregulation law Congress passed in May.

The proposal establishes four tiers of regulation for banks with over $100 billion in assets, as the central bank seeks to tailor rules for larger firms. The proposal would reserve the strictest rules for U.S. globally systemic banks, and step down requirements for smaller and less complex firms.

The law easing bank rules directed the Fed to trim regulations for banks with less than $250 billion in assets, and also gave the central bank discretion to further modify rules for larger banks as it saw fit. Wednesday’s proposal goes beyond the $250 billion threshold authorized by Congress, as it aims to provide relief to all but the nation’s largest banks.

According to the proposal, banks with between $250 billion and $700 billion in assets could enjoy a reduced “liquidity coverage ratio,” which requires banks to hold high-quality assets that could easily be turned into cash. The Fed estimated the proposal could reduce that ratio by as much as 30 percent for those firms.

Smaller banks would be subjected to less frequent “stress tests” of their capital plans by the Fed, and face even less restrictive liquidity and capital requirements.

Randal Quarles, the Fed’s vice chair for supervision, said the changes should “meaningfully” reduce compliance costs for banks without injecting significant new risk into the banking system, according to prepared remarks.

“These proposals embody an important principle: the character of regulation should match the character of a firm,” he said.

Reporting by Pete Schroeder; Editing by Chizu Nomiyama and Andrea Ricci


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