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Financial regulatory reform bill passes Senate, heads to House

In a strong show of support Wednesday, the Senate passed a bipartisan financial regulatory reform bill by a favorable vote of 67-31.

The bill, S. 2155, the Economic Growth, Regulatory Relief, and Consumer Protection Act, includes an easing of regulations particularly for small banks, community lenders and regional banks and is widely seen as the most significant revision to financial rules since the sweeping regulatory reform known as Dodd-Frank was passed in the wake of the financial meltdown in 2010.

The legislation now moves to the House of Representatives where Financial Services Committee Chairman Jeb Hensarling (R-Texas) is signaling an intent to add regulatory reform provisions to the bill that have passed the House by a significant margin, which could delay or even jeopardize its passage. Assuming the bill is favorably voted out of the House, potentially this Spring or Summer, it then goes to President Trump, who has indicated he would sign the reform into law.

From the perspective of BBVA Compass, some key legislation included in the bill that was approved by the Senate includes:

Bank SIFI Threshold

Under this bill, banks under $100 billion in assets will be exempted from Dodd-Frank “enhanced prudential standards” (EPS) immediately. Those standards can include stricter requirements for capital, stress tests, leverage, liquidity, resolution plans, credit exposure reports, concentration limits, public disclosures, and risk management. Once a bank crosses the $100 billion threshold, it could be subject to any or all additional EPS if the Federal Reserve deems it necessary, and those banks will be subject to periodic supervisory stress testing. Banks over $250 billion in assets will still be required to meet the enhanced prudential standards.  The Senate bill eliminates the company-run semiannual stress test requirement for all banks under $250 billion.

The MOBILE Act

Section 213 of the bill incorporates H.R. 1457, the MOBILE Act (Making Online Banking Initiation Legal and Easy), which makes it possible for financial institutions to take or receive from a consumer an image of a driver’s license or other ID card issued by a state or territory to verify identity when opening a bank account or applying for a financial product or service. For those without immediate access to bank branches, the MOBILE Act makes it possible for them to have another option.The MOBILE Act is an idea originally conceived in the BBVA Compass Legal Department, and its advancement through Congress has been a top priority of the bank’s Government Affairs Director Josh Denney in Washington over the last two years.

Synthetic ID Fraud

Section 215 incorporates S. 2498, the Protecting Children From Identity Theft Act, which codifies and modernizes the Consent Based Social Security Verification (CBSV) Service available at the Social Security Administration (SSA). The bill authorizes electronic consumer consent for verifying that their social security number matches their name and requires the SSA to update its system to process real time electronic inquiries from financial institutions or our affiliates, agents, subcontractors or assignees. This will ultimately eliminate synthetic fake IDs in the credit bureaus’ files and assist banks with a variety of fraud prevention and identity verification needs.

HVCRE Capital Treatment

Section 214 incorporates S. 2405/H.R. 2148 which clarifies regulations regarding the treatment of high-volatility commercial real estate (HVCRE) loans.  The bill states that the agencies may not impose higher capital standards on HVCRE exposures unless they are for acquisition, development or construction, and it clarifies what constitutes ADC status. The HVCRE ADC treatment would not apply to one-to-four-family residences, agricultural land, community development investments, existing income-producing real estate secured by a mortgage, or to any loans made prior to January 1, 2015. It also specifies when banks may reclassify ADC loans as non-HVCRE.

The Senate bill’s 54 sections include a number of other changes including adjustments to the mortgage TILA/RESPA Integrated Disclosure rules, flexibility around rural real estate appraisals, liability protections for reporting senior citizen financial abuse, and more.

For a synopsis of the bill and its provisions, click here for an executive summary from the American Bankers Association.

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