Overview
Title
To amend the Federal banking laws to improve the safety and soundness of the United States banking system, and for other purposes.
ELI5 AI
H.R. 8337 wants to make U.S. banks safer by changing some rules, like increasing the money amount that means a bank needs special checks, and making sure small banks aren't treated the same as big ones. It makes sure banks are checked more clearly and on time, but some of the changes might be tricky for smaller banks.
Summary AI
H.R. 8337 aims to amend various Federal banking laws to enhance the safety and soundness of the United States banking system. The bill proposes updates to increase asset thresholds for regulatory measures, streamline and clarify application processes for banks, establish robust requirements for stress testing and capital buffers, and improve the timeliness and transparency of bank examinations. It also includes provisions to review the effectiveness of Federal Reserve discount window operations and initiate changes to support smaller bank holding companies.
Published
Keywords AI
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AnalysisAI
The proposed legislation, titled the "Bank Resilience and Regulatory Improvement Act," aims to amend federal banking laws to enhance the safety and soundness of the United States banking system. The bill, introduced in the House of Representatives, contains several key provisions spread across various titles. It affects asset threshold regulations, bank failure prevention mechanisms, stress testing procedures, supervision appeal processes, discount window operations, and relief measures for small bank holding companies.
General Summary of the Bill
The bill seeks comprehensive reforms in the financial regulatory landscape. Primary measures include raising asset thresholds for regulatory oversight, which broadens the applicability of certain financial regulations to larger institutions, potentially impacting smaller banks. It introduces clearer timelines and procedures for regulatory application processing and fortifies accountability in the stress testing of financial institutions. Further, it mandates reviews of both bank supervision appeals and discount window operations to foster transparency and adaptability in financial oversight. Lastly, it provides relief to small bank holding companies by redefining asset thresholds.
Summary of Significant Issues
One significant issue arises from the bill's proposal to increase asset thresholds from $10 billion to $50 billion across several areas. This drastic change lacks thorough justification and could pose challenges for smaller and medium-sized institutions. Additionally, the bill's reliance on subjective criteria, such as "unusually complex" applications or "material loss," risks inconsistent regulatory applications. The undeveloped rationales, particularly in the exclusion of climate-related stress tests, add to concerns of inadequate preparedness against emerging risks.
Impact on the Public
Broadly, this bill might lead to more stringent oversight and improved safety within the financial system, theoretically safeguarding the public by preventing major bank failures. However, these changes could also consolidate power within larger institutions due to limited applicability to smaller entities, thus affecting market competition and possibly decreasing consumer choice in banking services.
For the public, positive impacts could include enhanced stability in the financial system, reducing the chances of systemic risks that lead to financial crises. On the downside, if smaller financial institutions struggle to compete under the new regulations, there could be reduced access to community-based banking services, which often serve localized or niche markets.
Impact on Specific Stakeholders
Larger banks are likely to be most affected by these proposed changes as they would now be subject to stricter oversight rules initially designed for smaller institutions. While potentially increasing their administrative burdens, these institutions might also gain a competitive edge over smaller players who lack similar compliance infrastructures.
Smaller banks, on the other hand, may experience both relief and pressure. The relief comes with raising the asset threshold for some regulatory measures, but the competitive landscape might tilt further in favor of larger entities.
Regulatory bodies will face increased burdens, especially given the short timelines imposed for rulemaking and reviews. They may struggle to implement these comprehensive reforms efficiently without additional resources.
In conclusion, while the "Bank Resilience and Regulatory Improvement Act" aims to enhance the U.S. banking system's resilience, it presents challenges in execution, particularly among smaller financial entities. Balancing comprehensive oversight with fair competition remains pivotal to its potential success, calling for careful evaluation and adjustments post-enactment.
Financial Assessment
The bill H.R. 8337 focuses on amending various federal banking laws to enhance the safety and soundness of the United States banking system. It incorporates several financial references that have been addressed and highlighted in different sections of the bill.
Increased Asset Thresholds
One of the significant financial references in the bill involves the dramatic increase in the asset threshold from $10,000,000,000 to $50,000,000,000. This change appears in Section 101, affecting the Bureau Supervision, Durbin Amendment requirements, Volker rule requirements, qualified mortgage requirements, and leverage and risk-based capital requirements. This increase in thresholds can have a significant impact on how financial institutions are supervised and regulated. The bill does not provide a detailed justification or analysis for this increase, which raises concerns about the potential implications for smaller or medium-sized financial institutions. Such a substantial adjustment could alter the competitive landscape and market dynamics, benefiting larger banks while possibly placing additional regulatory burdens on smaller institutions.
Changes Required to the Small Bank Holding Company Policy
Section 601 of the bill mandates the Board of Governors of the Federal Reserve System to update the Small Bank Holding Company and Savings and Loan Holding Company Policy Statement. The amendment calls for raising the consolidated asset threshold to $10,000,000,000. This change is intended to offer relief to small bank holding companies and savings and loan holding companies, aligning with broader efforts to tailor regulatory requirements based on asset size. By lifting the threshold, more institutions might benefit from reduced regulatory constraints, potentially fostering growth and competition within the sector. However, the overall effectiveness of this policy adjustment would rely on careful monitoring to avoid inadvertently increasing risks within the banking system.
Financial Oversight and Reporting
The bill outlines various processes and deadlines for reviews and reporting on financial operations, such as the review of resolution actions resulting in a material loss and the review of discount window operations. It does not involve direct spending or appropriations but imposes structured processes to enhance transparency and accountability, such as providing comprehensive reports to Congress and undergoing detailed reviews of financial mechanisms and operations.
In conclusion, the financial implications referenced in the bill focus primarily on regulatory thresholds and oversight mechanisms. While these adjustments aim to enhance resilience and regulatory efficiency, they also bring forward potential concerns and challenges regarding market competition, the adequacy of regulatory justifications, and the impact on smaller financial institutions.
Issues
The increase in asset thresholds across multiple regulatory areas from $10,000,000,000 to $50,000,000,000 (Section 101) lacks justification or analysis. This might significantly impact small or medium-sized financial institutions and alter market competition.
The extension of the application decision period based on the criterion of 'unusually complex' applications (Section 201) is subjective and could lead to inconsistent application and possible delays in banking operations.
In Section 301, the timeline of 90 days for rulemaking related to stress capital buffer requirements is potentially too short, which can lead to rushed decisions without proper regulatory oversight.
The prohibition on subjecting nonbank financial companies to climate-related stress tests (Section 302) lacks context or rationale, raising concerns about insufficient consideration of climate risks in financial stability assessments.
The use of subjective terms like 'material loss' and the lack of defined criteria for reviews in Section 403 could lead to inconsistent accountability for financial losses in bank resolutions.
The independent intra-agency appellate process (Section 402) includes requirements that may limit the pool of qualified appeals officials, and the complexity of the language could reduce public understanding and participation.
The review process of discount window operations (Section 501) is extensive and complicated, potentially causing delays in necessary operational reforms or improvements in financial liquidity support.
Sections
Sections are presented as they are annotated in the original legislative text. Any missing headers, numbers, or non-consecutive order is due to the original text.
1. Short title; table of contents Read Opens in new tab
Summary AI
The “Bank Resilience and Regulatory Improvement Act” includes several titles aimed at enhancing financial institution regulations. It covers topics like increasing asset thresholds, preventing bank failures, setting stress capital buffer requirements, improving bank supervision appeals, reviewing discount windows, and providing relief for small bank holding companies.
101. Increased asset thresholds Read Opens in new tab
Summary AI
The section outlines changes to financial regulations, increasing the asset threshold from $10 billion to $50 billion in various acts, including those related to consumer financial protection, electronic fund transfers, bank holding companies, and mortgage requirements. This means larger financial institutions are now subject to oversight and regulatory standards that were previously applied to smaller entities.
Money References
- (a) Bureau Supervision.—Section 1025(a) of the Consumer Financial Protection Act of 2010 (12 U.S.C. 5515) is amended by striking “$10,000,000,000” each place it occurs and inserting “$50,000,000,000”.
- (b) Durbin Amendment requirements.—Section 921(a)(6) of the Electronic Fund Transfer Act (15 U.S.C. 1693o–2(a)(6)) is amended by striking “$10,000,000,000” and inserting “$50,000,000,000”.
- (c) Volker rule requirements.—Section 13(h)(1)(B)(i) of the Bank Holding Company Act of 1956 (12 U.S.C. 1851(h)(1)(B)(i)) is amended by striking “$10,000,000,000” and inserting “$50,000,000,000”.
- (d) Qualified mortgage requirements.—Section 129C(b)(F)(i) of the Truth in Lending Act (15 U.S.C. 1639c(b)(F)(i)) is amended by striking “$10,000,000,000” and inserting “$50,000,000,000”.
- (e) Leverage and risk-Based capital requirements.—Section 201(a)(3)(A) of the Economic Growth, Regulatory Relief, and Consumer Protection Act (12 U.S.C. 5371 note (a)(3)(A)) is amended by striking “$10,000,000,000” and inserting “$50,000,000,000”.
201. Complete record on an application Read Opens in new tab
Summary AI
The text modifies several laws to establish clearer timelines and procedures for government boards and agencies to determine the completeness of applications from bank holding companies, savings and loan holding companies, and insured depository institutions. It mandates that these entities must notify applicants within 30 days about the completeness of their application, allows extensions for complex cases, and sets a 90-day decision deadline, after which the application is automatically approved if no decision is made.
301. Rulemaking related to stress capital buffer requirements Read Opens in new tab
Summary AI
The section mandates that within 90 days of its enactment, the Federal Reserve's Board of Governors must establish rules for determining parts of the stress capital buffer requirement for bank holding companies. Additionally, any changes to these rules must follow a notice and comment process.
302. Rulemaking relating to stress testing Read Opens in new tab
Summary AI
The section requires the Board to create rules for stress testing scenarios at least 30 days before conducting the tests, starting the year after the law is enacted. It also prohibits the Board from using its authority to subject nonbank financial companies to climate-related stress tests.
303. GAO report Read Opens in new tab
Summary AI
The Comptroller General is required to study and report to Congress every three years on the effectiveness of stress tests for financial institutions, assessing if they are comprehensive enough and identify risks to both the companies tested and the overall stability of the U.S. financial system.
401. Timeliness of examinations and required permission, regulatory, and reporting guidance Read Opens in new tab
Summary AI
The bill section aims to ensure that regulatory examinations of insured banks and credit unions are completed within 270 days, followed by an exit interview within 30 days, and a final report within 60 days. It also establishes procedures for these institutions to request written guidance from regulatory agencies on permissions and interpretations, requiring a response within specific timeframes, and mandates that agencies publish summaries of their determinations while protecting confidential information.
402. Update of independent intra-agency appellate process for reviewing material supervisory determinations Read Opens in new tab
Summary AI
The bill requires updates to the process that banks and credit unions use to appeal decisions made by financial regulators. It includes setting up Appeals Offices, appointing officials to review cases, allowing institutions to request hearings, and detailing how appeals should be handled and reviewed, while ensuring transparency and protecting institutions from retaliation.
403. Review of resolution actions resulting in a material loss Read Opens in new tab
Summary AI
The section amends the Federal Deposit Insurance Act to require that if the Deposit Insurance Fund suffers a significant loss due to an insured bank failing, the Inspector General must evaluate the incident to see if the loss could have been prevented. If it is determined that the loss was avoidable, the head of the Corporation must explain to Congress why it happened.
501. Review of discount window operations Read Opens in new tab
Summary AI
The section mandates the Board of Governors to perform a comprehensive review of the Federal Reserve Banks' discount window lending operations with a focus on their effectiveness, technology, and cybersecurity. It requires public input, the development of a remediation plan, and both initial and annual reports to Congress, ensuring accountability and continuous improvement in providing liquidity during financial stress.
601. Changes required to the Small Bank Holding Company and Savings and Loan Holding Company Policy Statement Read Opens in new tab
Summary AI
The Federal Reserve is required to update its guidelines so that small banks and savings and loan companies with assets up to $10 billion can benefit from special rules, and they have to do this within 180 days of the law being passed.
Money References
- Not later than 180 days after the date of enactment of this Act, the Board of Governors of the Federal Reserve System shall revise appendix C to part 225 of title 12, Code of Federal Regulations (commonly known as the “Small Bank Holding Company and Savings and Loan Holding Company Policy Statement”), to raise the consolidated asset threshold under that appendix to $10,000,000,000 for any bank holding company or savings and loan holding company. ---