House passes Dodd-Frank rollback legislation

Legislation redefining ‘systemically important financial institutions’ gets the approval of the House of Representatives.

A bill that will reduce federal oversight of some mid-sized regional banks was passed by the US House of Representatives on Thursday.

The legislation is the second to pass through the House that will reverse an element of the Dodd-Frank Act.

The bill will label bank holding companies ‘systemically important’ based on several standards, such as complexity and interconnectedness, rather than its asset size as the sole criterion.

Regional banks are in favour of the bill, with many saying it offers a more detailed picture of their risk than the $50 billion threshold at which banks are subject to stricter oversight from the Federal Reserve.

House Financial Services Committee chairman Jeb Hensarling said the $50 billion threshold was “a random number picked out of thin air”.

Its passage through the legal system, along with the Financial Choice Act, indicates future bills which reverse aspects of the Dodd-Frank Act may be well-received.

The Financial Choice Act will soon be voted on by the Senate. The act calls for the Volcker Rule, which states banks may only hold 3 percent of their tier 1 capital in private investments, to be scrapped. Banks had been offloading portfolios of private fund interests, and more sales had been expected before the compliance deadline in July 2017.

A hearing on a third act, the Financial Regulatory Improvement Act, has been held in front of the Senate Banking Committee. This would exempt banks with less than $10 billion in assets from the Volcker Rule.