A panel of U.S. financial regulators said March 13 that it would grant hearings to bank holding companies seeking to escape their designation as systemically important, and the enhanced regulatory supervision that comes with it.
The Financial Stability Oversight Council (FSOC) said in a draft Federal Register notice that it would grant hearings to bank holding companies that want to show significant changes to their corporate structure and balance sheets that could allow the firms to get out of extra capital and other standards.
The changes took effect immediately, but the FSOC, which is currently chaired by Treasury Secretary Steven Mnuchin, wants to get public input on the hearing process. The comment period will close 30 days after the FSOC notice appears in the Federal Register.
Other changes to the designation and de-designation process for systemically important financial institutions (SIFIs) may also be in store, according to the FSOC notice.
The 2010 Dodd-Frank Act mandated that any bank holding company with $50 billion in assets or more was considered systemically important, meaning that its potential failure posed a potential threat to the broader financial system.
Many of the smaller SIFIs, including those hovering around the $50 billion asset threshold, have argued that they should not be subjected to the raised capital and supervisory standards that global banking giants like JPMorgan Chase & Co. and Bank of America Corp. operate under. That argument has gained support among regulators, lawmakers, and former lawmakers, including former Rep. Barney Frank (D-Mass.), one of Dodd-Frank’s namesakes.
The FSOC changes may not be necessary if a Senate bill (S. 2155) that would change the asset threshold for designating a bank holding company systemically important from Dodd-Frank’s $50 billion to $250 billion becomes law. Both Frank and former Sen. Chris Dodd (D-Conn.) say that raising the SIFI threshold to $250 billion is too high and have opposed the bill.
The bipartisan bill, which would free around two dozen banks from enhanced regulation and supervision, is expected to pass out of the Senate this week. The House is expected by many to pass it without many changes to preserve Democratic support it needs to become law.
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