Systemic Risk Council Comments on the S.2155, the Economic Growth, Regulatory Relief and Consumer Protection Act

On February 21, 2018, the Systemic Risk Council submitted a comment letter to the Chairman Crapo and Ranking Member Brown of the U.S. Senate Banking, Housing and Urban Affairs regarding S. 2155, the Economic Growth, Regulatory Relief and Consumer Protection Act (the “Bill”).

The Council limited its comments to only the proposals to raise the balance sheet size threshold for treating an intermediary as ‘systemic’ to $250bn and to exclude banks’ deposits with the Federal Reserve from the leverage ratio.

The Bill is predicated on an assumption that the Dodd-Frank reforms overshot. On some fronts, particularly as concerns truly small banks, the Council agrees. But relative to the period when the financial regulatory reform was designed and legislated, certain aspects of the global environment have deteriorated. Therefore, the Council recommends that (i) the threshold for applying enhanced prudential standards not be raised as far as $250bn; (ii) the stress testing requirements of significant intermediaries not be moved away from an annual cycle; and, if such change is made, that it be coupled with a grant of authority to banking regulators to conduct ad hoc stress tests in cases where any one of them believes that such tests are warranted by threats to the stability of the financial system or by an increase in uncertainty about the resilience of the banking system; (iii) the supplemental leverage ratio not be changed to exclude IM placed with CCPs; and (iv) the reserves held by banks with the Federal Reserve be excludable from ‘total assets’ only as a temporary measure where necessary given the mechanics of monetary policy.

Read the full letter here: SRC Comment Letter to U.S. Senate Committee