House Tees Up Legislation on Bank Capital, Rule Reviews

By Jeff Bater

Banks would win relief from capital requirements and get more opportunity to review outdated rules under legislation the House could consider the week of Feb. 26.

The House Rules Committee is meeting on two banking-related bills Feb. 26, as lawmakers eye potential negotiations with the Senate on its bank regulatory relief package.

H.R. 4296, sponsored by Rep. Blaine Luetkemeyer (R-Mo.), would ease 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.

H.R. 4607, sponsored by Rep. Barry Loudermilk (R-Ga.), would shorten how often banking regulators are required to review potentially outdated rules — from the current 10-year period to every seven years. In addition, the bill would require the Consumer Financial Protection Bureau (CFPB) to participate in the review process.

The House Financial Services Committee, led by Chairman Jeb Hensarling (R-Texas), has approved a flurry of banking-related bills in recent months, with the full chamber voting on some of those measures. This comes as the Senate gears up for a potential early March vote on bipartisan legislation (S. 2155) that would relax some Dodd-Frank Act requirements on small and mid-size banks.

Delicate Balance

The expected House floor votes next week are the latest sign that House Republicans are setting up positions for likely negotiations involving S. 2155 and the Financial Choice Act (H.R. 10), a broader Dodd-Frank rollback passed by the House last year, according to Daniel F. C. Crowley, a partner who leads the financial services policy practice at K&L Gates.

“They’ve broken out Financial Choice Act provisions individually to pass through the House to demonstrate the extent of bipartisanship,” he told Bloomberg Law. “All are fair game for discussion.”

Crowley expects a full Senate vote on S. 2155 some time in the next two weeks in essentially its current form. Senate Banking Committee Chairman Mike Crapo (R-Idaho) crafted the bill to attract bipartisan support and avoid divisive issues such as breaks for Wall Street banks or weakening the CFPB. Among the bill’s 25 cosponsors, 12 are Democrats and one is an Independent.

“I think the partisan balance in the Senate is so delicate, there’s a very strong desire not to add anything that might jeopardize the bill and the fragile bipartisan coalition,” Crowley said.

With Senate passage, House Republicans can push during conference talks to add provisions from the Choice Act. “The idea here is, ‘Get the bill through the Senate and then add as much as you can, while preserving the ability to get 60 votes in the Senate on the conference report,’” Crowley said.House Republicans will have to balance their desire for broader changes with the realities of “the Senate filibuster and the ever-dwindling congressional calendar,” according to Isaac Boltansky, an analyst at Compass Point Research & Trading.“Chair Hensarling’s reported focus on bipartisan bills should be viewed as a broad positive for the effort, but we caution that House GOP demands could add a layer of procedural complexity,” Boltansky said in a Feb. 23 research note to clients.

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