While regulatory relief legislation would raise the asset threshold for “systemically important” banks, Federal Reserve Chairman Jerome Powell said the central bank could still apply prudential scrutiny to banks below that new cutoff.
The Senate legislation would weaken scrutiny of large financial institutions, undercutting Dodd-Frank’s mission to provide tailored oversight across the system.
The Senate is poised to pass the most substantial bank regulatory relief since the crisis, but any disruption of the post-crisis regime is still eclipsed by how much the bill enshrines Dodd-Frank.
House Chief Deputy Whip Patrick McHenry, R-N.C., said House lawmakers are having discussions with the Senate about ways to go further on rolling back Dodd-Frank before the Senate is expected to hold a floor vote.
Banks will have to show they can withstand “severely adverse” conditions; the office will be under the direct control of acting director Mick Mulvaney.
The Fed released its stress testing scenarios for banks this year, raising the bar on what constitutes severely adverse hypothetical market conditions.
Swelling capital levels, tax cuts and changing attitudes about post-crisis regulation could encourage bigger banks to issue the one-time payouts to reward shareholders and better manage their returns.
Over the past year, the focus of several banking policymakers has been how much the regulatory pendulum might swing back toward the industry’s liking. That theme will likely continue in 2018.
