Legislation introduced in the Senate Thursday would exempt some smaller local banks from onerous Dodd-Frank Act regulations which make it more difficult for them to lend money to individuals and small businesses in their hometowns.
The Systematic Risk Designation Improvement Act, introduced by Sens. Clair McCaskill (D-Mo.) and David Perdue (R-Ga.), would ease Dodd-Frank restrictions on smaller community banks with less than $50 billion in assets. In addition, regional banks with assets totaling more than the $50 billion threshold could also find relief from certain Dodd-Frank requirements if they can demonstrate that they do not pose a significant threat to the global economy if their investments fall apart.
“Regional banks offer a lifeline to small businesses and entrepreneurs looking to create jobs,” said Perdue. “Dodd-Frank overregulated these banks by placing them into the same category as huge banks with a global reach. This sent these banks’ compliance costs through the roof and limited their ability to do what they do best—support their communities. This legislation would actually test banks for systemic risk rather than forcing banks to comply with an arbitrary figure.”
Under the legislation, consideration for Dodd-Frank regulatory relief for the smaller banks would be based on a five-factor test examining bank: size, interconnectedness, substitutability, global cross-jurisdictional activity, and complexity.
McCaskill, who voted for Dodd-Frank, said the legislation is an opportunity to correct an unintended negative consequence of the sweeping financial reform legislation.
“When even some of the architects of ‘Dodd-Frank’ agree the law is unnecessarily burdensome on regional banks, you know we’ve got a problem on our hands,” she said. “This is a commonsense fix that’ll untie the hands of our small regional banks and return to them the flexibility to lend to Missouri customers who want to buy a house, or start a business.”
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