S. 2155: Now for the Just-as-Hard Part

Prior to May 24, 2018, bankers may have had a hard time remembering what a big win in Congress looked like. It’s true that in the past year we saw important progress with the enactment of historic tax reform and the overturning of the Consumer Financial Protection Bureau’s arbitration rule. But substantial regulatory reform had been elusive for a decade.

That changed when Senate Banking Committee Chairman Mike Crapo (R-Idaho) committed to crafting a bipartisan bill that recalibrates banking rules to allow banks to better serve their customers, clients and communities. Crapo’s distinctly bipartisan approach, plus roughly 19,000 banker visits to Washington and tens of thousands of emails and calls to lawmakers over the past eight years, changed everything.

The result is S. 2155, the first positive, bipartisan regulatory reform bill to be signed into law in years.

This occasion is worth noting not because S. 2155 contains everything banks want and need in order to fully serve their customers; it doesn’t. But the law suggests that the era of indiscriminately heaping more rules on banks has ended and a new era of better tailored regulation is settling in. It also recognizes that banks play an essential role in helping their customers, communities and the economy grow, and that policy should support that role, not make it harder.

That’s real progress, and it’s thanks to bankers owning their role in the political and policy-making process. You identified the problems, helped craft solutions and explained to lawmakers why they mattered.

As tempting as it is to spend the rest of this column spiking the ball and congratulating us all on a job well done, I won’t. Because even more work lies ahead. Not only is there so much more Congress can do to right-size financial rules, but a quick scan of the effective dates of S. 2155’s provisions shows that Congress made about one-third of the laws’ changes effective immediately; the rest were punted to the regulatory agencies to handle. (You can find a list of effective dates at aba.com/s2155.)

That means a lot of regulatory proposals and guidance is still to come. Bankers will need to be part of each rulemaking to ensure the banking agencies implement the law as intended.

Here’s just one example of why staying involved will matter. Among the provisions to be implemented is a variation of one that ABA and the state associations first suggested, relieving highly capitalized community banks (those under $10 billion in assets) from the complex Basel III capital standards. Congress directed the banking agencies to designate such banks using a simple leverage ratio that is somewhere in the 8-to-10 percent range. If regulators choose 8 percent, around 95 percent of banks under $10 billion could be eligible for the relief. If they choose 10 percent, only two-thirds of those banks would qualify. We believe 8 percent is a logical and appropriate threshold and will need bankers’ help to make that case.

In addition to S. 2155 implementation, the new crop of leaders at the banking agencies are eyeing other improvements to rules that can be done through regulatory fiat. These include modernizing the Community Reinvestment Act and updating Bank Secrecy Act/anti-money laundering rules, not to mention a top-to-bottom review of the Consumer Financial Protection Bureau’s rules and actions.

So for those who might be thinking that S. 2155’s enactment means fewer trips to Washington to plead your case, think again. Your engagement remains vital to improving the policy environment for banks — the focus just shifts from lawmakers to rule makers.

Weighing in on the details of proposed rules is the granular part of advocacy, but it’s just as consequential as helping a bill through Congress. That’s why we’ll be reaching out to bankers when the time comes to help us shape rulemakings. I hope you’ll respond with as much passion and commitment to our regulatory action alerts as you did throughout S. 2155’s long, eight-year journey. 

E-mail Rob Nichols at nichols@aba.com.

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