Dodd-Frank Looms For Capitol Hill Consideration

Dodd-Frank no more – or no more “no more” Dodd-Frank?

Talk of regulatory reform is normal discourse on the Hill.

Sometimes change is afoot, sometimes it is stopped in its tracks. Sometimes the change is cheered, sometimes inertia is welcome.

Dodd-Frank, the controversial 2010 legislation that came in the wake of the financial crisis that was in the crosshairs of the Trump administration from the start, seems to be resting a bit easy at the moment – but perhaps just for the moment.

More on that in a bit, but discussion is merited on how the overall landscape has taken shape in the first year-plus of the Trump administration. In a word, the climate for change across financial services could be described as benign.

In general, as noted in Financial Times, there’s been a lack of new legislation shifting the ground beneath the financial industry’s feet. In fact, noted the publication, no major new financial regulations – the kind that would impose restrictions – have come to vote or even, really, been on the table since Trump took office last January.

From the Treasury Department on down, that has lightened day-to-day regulatory scrutiny of banks. That comes as Randal Quarles, who serves as the vice chairman for supervision at the Federal Reserve Board of Governors, has said that regulation should be marked by “efficiency, transparency and simplicity.”

The FT noted that other agencies are moving away from the active oversight that had marked the previous administration’s efforts under Barack Obama. The Office of the Comptroller of the Currency is examining the Community Reinvestment Act, which in part means that rules governing short-term lending may be reversed, and would let community banks compete more directly against payday lenders.

A bill to reshape Dodd-Frank that may come to the Senate floor in the next few weeks, eyeing smaller financial institutions, does a number of things. For starters, the legislation would boost the threshold under which banks are subject to regulation from $50 billion in assets to $250 billion. That means some of the larger (though of course not the largest) lenders in the nation would get some relief from Federal Reserve scrutiny. Capital requirements would be loosened and stress tests would come less than once a year.

Elsewhere, in mid-week the Treasury Department has said that some of the regulatory oversight mandated by Dodd-Frank should be preserved, including the ability through what is known as the “Orderly Liquidation Authority” (or OLA) of regulators to “wind down” failing entities, a tenet that big banks had sought to keep.

Under the OLA, and as put in place by Dodd-Frank, regulators can wind down large and complex institutions through actions that in part use taxpayer funds to give those institutions “emergency liquidity,” as noted by Reuters.

FinTech Innovation and Cooperation in the Cards?

Last Monday (Feb. 19), the Financial Conduct Authority and the U.S. Commodity Futures Trading Commission said they have agreed to collaborate in an effort to boost FinTech innovation. That collaboration comes in the form of the Cooperation Arrangement on Financial Technology Innovation. The two entities are cross-supporting efforts through LabCFTC and FCA Innovate.

Amid the backdrop of innovation – though admittedly unrelated to the FCA/CTFC announcement – the Basel Committee on Banking Supervision implied in a report that FinTech has a long road to travel before really challenging banks on their home turf.  As noted in the report, “despite the hype, the large size of investments and the significant number of financial products and services derived from FinTech innovations, volumes are currently still low relative to the size of the global financial services sector.”

SEC Eyes Crypto Exchange Activities

No discussion on regulation would be complete without a bit of news from the bitcoin realm.  The Securities and Exchange Commission has charged a former cryptocurrency exchange and its founder – respectively, BitFunder Jon E. Montroll – with the theft of more than 6,000 bitcoins. The SEC also said that Montroll sold “unregistered securities” that were claimed to be investments on the exchange, while misappropriating funds from those activities as well.