Senators Urge Further Regulatory Tailoring for Banks Over $100B

In a letter to Federal Reserve Vice Chairman for Supervision Randal Quarles today, six Republican senators called on the Fed to more closely tailor regulations for banks with more than $100 billion in assets. The senators’ letter came after a pledge from Quarles last month that the Fed would move swiftly to develop its framework for tailoring enhanced prudential standards for banks between $100 to $250 billion in assets.

The lawmakers pointed out that data from the Fed itself “establish[es] that the financial companies below $250 billion are not systemic,” and questioned the Fed’s intention to continue broadly applying enhanced prudential standards to banks in the $100 billion to $250 billion asset range. They noted that in passing S. 2155– which raised the SIFI designation threshold from $50 billion to $100 billion — “Congress did not ask the Fed to create a third layer of treatment between financial institutions above and below $100 billion in total assets,” but rather “empowered the Fed to tailor the regulations to address individual risk-profiles of financial companies.”

In addition, the lawmakers pointed out that the Fed’s data “also shows that regional financial companies with more than $250 billion in assets are not systemic as well.” In cases where data indicates that an institution does not pose a systemic threat, they urged regulators to “reduce regulations so that all non-systemic firms are treated accordingly.”

Turning to international banks, the lawmakers noted that the Fed already requires international banks with significant U.S. operations to establish intermediate holding companies, and said that these institutions should “receive comparable regulatory treatment to U.S. BHCs of similar size and risk profile.”

The American Bankers Association welcomed the letter. “ABA has been a long-time advocate for tailoring regulation to a bank’s business model and risk profile, as opposed to relying on arbitrary asset thresholds — a principle now enshrined in law,” said ABA EVP Wayne Abernathy. “Tailored regulation will allow banks of all sizes to better serve their customers and communities while improving the safety and soundness of any institution.”