Should Risk Factors Other Than Size be Considered When Designating a Bank as Systemically Important? (H.R. 6392)
Do you support or oppose this bill?
What is H.R. 6392?
(Updated December 28, 2017)
This bill would eliminate the automatic designation of banks as systemically important based solely on asset size, and would instead require regulators to develop a formal process for designating systemically important financial institutions (SIFI) based on their specific risk profile. It would require regulators to also consider the bank’s interconnectedness, complexity, and the availability of readily available substitutes for the services it offers.
Current law designates banks as systemically important if they have more than $50 billion in assets. Banks given the SIFI designation are subject to stricter regulatory standards.
Argument in favor
The financial services industry is extraordinarily complicated. As a result, the industry’s regulations should consider how interconnected a bank is when determining whether it is systemically important rather than simply labelling all banks with more than $50 billion in assets as such.
Argument opposed
There needs to be stricter regulation on big banks after the havoc they wreaked on America’s economy during the financial crisis. Banks that are bigger than $50 billion are systemically important, other factors need not be considered.
Impact
Financial institutions that could be considered as systemically important; and banking regulators.
Cost of H.R. 6392
A CBO cost estimate is unavailable.
Additional Info
In-Depth: Sponsoring Rep. Blaine Luetkemeyer (R-MO) introduced this bill to ensure that regulators consider more than just a financial institution’s size when designating them as systemically important. After the House Financial Services Committee passed an earlier version of this legislation, Luetkemeyer offered the following statement:
“I am pleased that my colleagues on the House Financial Services Committee understand the importance of my legislation, which would more closely tailor the regulation of financial institutions on actual risk rather than asset size alone. As a former bank examiner, I understand the importance of standards that account for risk and the varying structures of small, mid-size, regional and large financial institutions. Today’s bipartisan vote… shows that there is near unanimous recognition from Financial Services Committee members that the process for designating bank holding companies as systemically important financial institutions, and Dodd-Frank itself, need to be changed.”
This legislation has the support of 9 bipartisan cosponsors in the House, including five Republicans and four Democrats.
Of Note: According to the Federal Reserve Board, there are 35 financial institutions in the U.S. that are larger than $50 billion in assets, all of which would be designated as systemically important because of their size under current law.
Media:
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Sponsoring Rep. Blaine Luetkemeyer (R-MO) Press Release (Previous Version)
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CNBC
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Crowdfund Insider
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National Law Review
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American Bankers Association (In Favor)
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