April 17 – The Regional Bank Coalition (RBC) has submitted a proposal to the Senate Banking Committee in response to calls from Chairman Crapo (R-ID) and Ranking Member Brown (D-OH) on ways to “foster economic growth.”
The proposal reiterates RBC’s support for the Systemic Risk Designation Improvement Act, which has been introduced by Rep. Luetkemeyer (R-MO) for the past two Congressional sessions and has been one of the only Dodd-Frank Act reform bills to receive bipartisan support. The bill would move away from determining banking regulations solely on an asset threshold, which currently stands at $50 billion, and towards a multi-factored system that looks at a bank’s business model and activities.
“Size alone is not an accurate measure of an institution’s risk level and does not make the financial system safer nor sounder. Examining the full picture, including a bank’s activities, asset types, and interconnectedness, is a more strategic and accurate means to measuring and mitigating risk in the financial ecosystem,” said Matt Well, spokesperson for RBC. “Worse, the current improperly calibrated regulatory environment has made it more difficult for regional banks to lend and help their communities grow. Treating regional banks, which serve as the backbone of the economy by focusing primarily on community and commercial lending, in the same manner as the more risk-sensitive Wall Street banks means there are less resources for Main Street.”
Sen. Sherrod Brown has said, “We all agree that a regional bank is not systemic in the same way that a money center bank is. The failure of one regional bank, assuming it is following a traditional model, will not threaten the entire system.” In addition to a number of regional banks with a footprint in Ohio, three regional banks—Huntington, KeyBank, and Fifth-Third—are headquartered in Brown’s home state of Ohio and hold more than $116 billion in deposits in the state. In total, regional banks make up nearly two-thirds of the state’s deposit market share, totaling more than $213 billion.
Other regulators, including former Federal Reserve Board Chairman Ben Bernanke, Federal Reserve Bank of Philadelphia president Patrick Harker, and Treasury Secretary Steven Mnuchin, have voiced support for a system which goes beyond size to determine an institution’s risk level.
The 2016 version of the bill, which had five Republican and four Democratic cosponsors, passed the House in December 2016 by a 254-161 vote—including 20 Democratic yeas.
About the Regional Bank Coalition: The Regional Bank Coalition is a group of regional banks that support regulation based on risk and business model to ensure safety and soundness. For more information, visit www.regionalbanks.org or follow on Twitter @rgnlbanks.