House Approves Bipartisan Bill to End Flawed, Arbitrary Designation Process
Washington,
December 19, 2017 -
Today, the House voted 288-130 to pass H.R. 3312, the Systemic Risk Designation Improvement Act of 2017, with bipartisan support.
This bill – sponsored by Rep. Blaine Luetkemeyer (R-MO) and cosponsored by both Republicans and Democrats in the House – removes the arbitrary $50 billion asset threshold used in the Dodd-Frank Act to automatically designate certain financial institutions as "systemically important financial institutions" (SIFIs) and instead subjects the institutions to enhanced regulatory standards based on their activity.
“It simply doesn’t make sense to subject small, regional and mid-sized banks with only $50 billion in assets to the same expensive and cumbersome SIFI regulatory regime as a bank like JP Morgan Chase, which has $2.5 trillion in assets. Based on size alone, the $50 billion bank is just 2 percent of JP Morgan Chase’s size,” explained Financial Services Committee Chairman Jeb Hensarling (R-TX). “What does make sense is to base the regulation of these financial institutions on their actual risk profile rather than their asset size alone – which is exactly what Mr. Luetkemeyer’s strongly bipartisan bill will do.”
“Under the current regulatory framework for the designation of systemically important financial institutions, or SIFIs, risk is determined based solely on an institution’s size. This approach fails to take into account many differences in business models or risks posed to the financial system. My legislation will remove the arbitrary approach taken and replace it with an analysis of the actual risk presented by a bank holding company to the financial system. It is time to take a pragmatic approach to the SIFI designation process and focus the Federal government’s resources on legitimate threats to the U.S. financial system. I thank my colleagues for their bipartisan support of this important legislation and urge the Senate to move it quickly to the President’s desk to be signed into law,” said Rep. Luetkemeyer.
Former Rep. Barney Frank, the Democratic co-author of the Dodd-Frank Act, has said the $50 billion asset threshold in the law was “arbitrary” and a “mistake.”
The threshold has also been criticized by Federal Reserve Chair Janet Yellen, former Federal Reserve Board Governor Daniel Tarullo, and former Comptroller of the Currency Thomas Curry.
