Trump Adviser Predicts Action in 2017 by Congress on SIFI Level

By Jeff Bater

Senate lawmakers might take action this year to significantly increase the $50 billion Dodd-Frank threshold for designating banks as systemically important, a key adviser to President Donald Trump signaled Oct. 16.

Gary Cohn, who directs the National Economic Council, told a banking conference there is an “enormous amount of traction” in raising the much-maligned asset threshold. Banks with a SIFI label are subject to greater oversight.

“There’s a shot we get something done on the $50 billion level this year on a bipartisan way,” Cohn said at an American Bankers Association conference in Chicago.

A Substantial Hike

Cohn didn’t specify an exact new threshold but indicated the proposed increase would range from $200 billion to below $300 billion.

“We’re not talking about a little move,” he said, adding that the argument is over what the final figure would be.

Jaret Seiberg, an analyst at Cowen & Co., said any change to the threshold set out in the 2010 Dodd-Frank Act may not occur anytime soon. “This is still likely to drag into late 2018,” he said in a research note.

The House Financial Services Committee approved a bill Oct. 12 that would undo the $50 billion asset threshold and instead require large banks labeled as “global systemically important” under federal rules to follow extra regulations that go along with the SIFI label. Other banks would be subject to SIFI requirements only if the Federal Reserve deemed the bank’s size, interconnectedness, uniqueness, global presence, and complexity merited the extra scrutiny.

The bill, H.R. 3312, sponsored by Rep. Blaine Luetkemeyer (R-Mo.) was approved 47-12, with some Democratic support.

Broader legislation overhauling the Dodd-Frank Act that passed the House in June is considered dead on arrival in the Senate, where lawmakers continue to negotiate their own bill.

Community Banker on Fed?

During the ABA conference, Cohn expressed frustration over the pace of installing new financial regulators. “Getting our personnel into place has taken a lot longer than any one of us would ever have imagined,” he said.

Randal Quarles was approved by the U.S. Senate Oct. 5 as the Federal Reserve’s first-ever vice chairman for supervision. In addition to that successful nomination, Cohn told the conference the Trump administration intends to fill a seat on the Fed board for community banks.

He said Trump will nominate a person for the Fed seat after FBI vetting, which is underway. Cohn didn’t identify the prospective nominee.

His remarks were met with applause. Banking interests have advocated the need for community bank experience on the board of the regulator.

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

To contact the editor responsible for this story: Michael Ferullo at MFerullo@bna.com

Copyright © 2017 The Bureau of National Affairs, Inc. All Rights Reserved.