Banks Continue To Search For Regulatory Relief

Almost a full year into Donald Trump’s first term as U.S. president, banks of all sizes are pushing the federal government for greater regulatory relief ahead of a key lawmaker meeting next week.

Specifically, the banks are pushing for changes to a Senate bill that currently allows for more regulatory flexibility for smaller U.S. banks to be expanded to also include larger Wall Street and regional banks as well.

The Senate Banking Committee has reached a tentative — and bipartisan — deal that would cut the number of banks labeled as systemically risky in half. The bill is a bit of a disappointment for larger banks, because they will likely remain stuck with the costly systemically risky label, as the bill as written offers little in the way of relief to that banking segment.

Republicans have spent the better part of half a year winning eight Democrats over to pass the bill — meaning a compromise to raise the asset threshold at which lenders are deemed systemically risky to $250 billion from $50 billion was necessary.

That becomes a problem for “super-regional banks” like U.S. Bancorp, Capital One and PNC, which hit that benchmark but aren’t global in scope. They argue that the new regulations put them at a disadvantage, as their smaller regional competitors can now avoid burdens to which they are still subjected.

“We are disappointed. We would rather see no bill than this bill,” said one super-regional bank lobbyist, noting that his institution will not oppose it.

“Plan B … is to fix it on the margins.”

The asset threshold is likely immovable — but super regional banks are hoping to see other tweaks that will give the Fed more flexibility in evaluating and applying systemically risky rules. They are also hoping to lower operational costs.

But any change to this bill will be tricky, as its current form was a tough sell and a careful balancing act between Democratic and Republican interests.

“Both sides are at their breaking point,” noted Democratic co-sponsor of the bill Virginia Senator Mark Warner.

Lobbyists also believe they will have another bite at the change apple once the bill passes the Senate and travels to the Republican-dominated U.S. House of Representatives.