Dodd-Frank Author: Current SIFI Threshold Is ‘Mistake’

The $50 billion asset threshold in the Dodd-Frank Act for designation as a systemically important financial institution was a “mistake,” former Rep. Barney Frank (D-Mass.) said in a radio interview yesterday. “That’s too low,” he said. “That was a mistake. We should have made it much higher.” Frank tossed out $125 billion as an alternative, noting that he also regretted not indexing the threshold to inflation.

“When it comes to lending and job creation, the regional banks are obviously very, very important,” said the former chairman of the House Financial Services Committee and lead co-sponsor of Dodd-Frank, speaking on John Catsimatidis’ radio program. “I hope that if we get some regulatory changes, we give some regulatory relaxation to those banks.”

Frank also said he regretted that banks with less than $10 billion in assets have been affected by provisions like the Volcker Rule. “We did not think they were going to affected by some of these rules,” he explained, arguing that banks under this level should be explicitly exempted from Volcker and that the threshold should also be indexed.

The American Bankers Association has consistently argued for an end to arbitrary asset thresholds and cliffs, to be replaced with a tailored supervisory approach that takes into account a broader view of bank characteristics, including asset size, business model and risk profile.