For the past eight years, community banks have voiced their struggles of competing under heavy regulations set forth by the 2010 Dodd-Frank Act regulatory reform law, which generated more than 20,000 pages of regulations. In a landmark victory for post-crisis banking policy, Congress voted to enact the bipartisan Economic Growth, Regulatory Relief and Consumer Protection Act (S. 2155) on May 22. Banking industry supporters said the bill’s passage brings much-needed regulatory relief to community banks, allowing them to grow and compete, and better serve their customers.
“This hard-fought, long-awaited community bank regulatory relief legislation will put community banks in an enhanced position to foster local economic growth and prosperity. By unraveling some of the suffocating regulatory burdens community banks face, they are better able to unleash their full economic potential to the benefit of their customers and communities,” ICBA President and CEO Rebeca Romero Rainey said.
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Dodd-Frank was implemented to rein in Wall Street’s excesses, but community banks – who argued they had very little to do with the Great Recession – ended up shouldering a lot of the burden of the regulations. While this new bill doesn’t replace Dodd-Frank, it rolls back many requirements that affected community banks. The new bill makes the following changes:
- Provides Qualified Mortgage designation for mortgage loans at most community banks
- Raises the threshold for designation as a systemically important financial institution from $50 billion in assets
- Exempts certain community banks from TILA escrow requirement
- Raises the Federal Reserve’s Small Bank Holding Company Policy Statement’s asset threshold from $1 billion to $3 billion
- Expands eligibility for the 18-month regulatory exam cycle to more community banks
- Applies principles of tailored supervision to larger banks
- Eliminates Dodd-Frank Act stress testing and ease formal risk committee requirements for larger community banks
- Simplifies capital calculations for community banks
- Provides relief from appraisal requirements for smaller mortgages
- Institutes longer exam cycles for community banks
- Provides charter flexibility for federal thrifts with less than $20 billion in assets
The bill cleared the Senate in March and will now head to President Donald Trump’s desk for final signature. It is expected to be approved sometime this week.
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