H.R. 4296 utilizes a methods-based approach to modify operational capital standards while also ensuring strong and healthy financial institutions and, in turn, a stronger economy. Sponsored by Subcommittee on Financial Institutions and Consumer Credit Chairman Blaine Luetkemeyer (R-MO), the bill ensures that existing capital standards are appropriately tailored and not needlessly locking up capital by limiting the imposition of operational risk capital requirements to a bank’s current activities and businesses and permitting adjustments to mitigate operational risk.

“Hundreds of billions of dollars are currently sitting in banks across the country not being utilized to fund mortgage loans, car loans, and other day-to-day financing that American individuals and small business owners need” explained Financial Services Committee Chairman Jeb Hensarling (R-TX). “H.R. 4296 simply amends the method of how reserve capital is calculated by establishing standards based on an organization’s current business activities, making the requirements more accurate and tailored to a bank’s current risk profile. That means banks would still retain sufficient reserves to weather an economic storm, but they would also be able to put the billions of dollars currently sitting on the sidelines to work to help fuel the economy.” 

Chairman Luetkemeyer said, “I’m happy to see the House pass yet another common sense financial reform to improve the efficiency of our financial system and remove misguided regulations. The implementation of the Basel Committee’s operational risk requirements has forced American banks to hold billions of dollars in reserve to account for activities they no longer practice. That means billions of dollars are currently sitting in banks across the nation instead of being lent to help businesses grow and create jobs in their communities.  My bill takes a different approach, calculating reserve capital based on an organization’s current risk and business model. With this common sense change, banks will continue to hold enough capital to manage risk while unshackling billions of dollars and injecting it into the U.S. economy.”

The bill was originally Section 152 of H.R. 10, the Financial CHOICE Act of 2017, which passed the House in June 2017.  The Financial Services Committee favorably reported H.R. 4296 to the House on November 15, 2017 by a vote of 43-17.

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