Bill Curbing Capital Requirements on Banks Passes House

By Jeff Bater

Banks would gain relief from capital requirements under a bill passed by the House Feb. 27.

Lawmakers voted 245-169 for H.R. 4296, sponsored by Rep. Blaine Luetkemeyer (R-Mo.), and calls for easing operational risk capital requirements for banks.

The bill prohibits the establishment of such requirements unless they are based on a bank’s current activities and are determined by a forward-looking assessment of its potential losses — and not based only on the company’s historic losses. It would apply to large, systemically important banks such as JPMorgan Chase, Citigroup, and Bank of America.

”Banks would still retain sufficient reserves to weather an economic storm,” Rep. Jeb Hensarling (R-Texas), chairman of the House Financial Services Committee, said during debate before the floor vote. “This bill properly calibrates operational capital.”

Critics of H.R. 4296 say operational risk capital is a central part of the capital added to make big banks safer since the financial crisis. Americans for Financial Reform, in a November letter, called the proposal “a transparent effort to boost big bank profits by reducing the capital held to protect the financial system and the public against the effects of a megabank failure.”

Senate Package

The floor vote Feb. 27 comes as House Republicans anticipate potential negotiations with the Senate on its bank regulatory relief package (S. 2155).

The Senate is expected to vote as early as March on S. 2155, which reduces Dodd-Frank Act regulations on small and midsize lenders, but does not address large banks. The Senate bill would have to be reconciled with the Financial Choice Act (H.R. 10), a broader Dodd-Frank rollback passed by the House last year.

Rep. Maxine Waters (D-Calif.) said in the floor debate on H.R. 4296 that the bill is meant to help the largest banks in the U.S., not community banks.

To contact the reporter on this story: Jeff Bater in Washington at jbater@bloomberglaw.com

To contact the editor responsible for this story: Michael Ferullo at mferullo@bloomberglaw.com

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