On May 25, legislation was signed into law that relieves some of the regulatory burden community banks have faced since passage of the Dodd-Frank Act 8 years ago.
Many industry observers believe that the Economic Growth, Regulatory Relief, and Consumer Protection Act will make it easier for community banks to lend money to creditworthy customers. This, in turn, will enable banks to better serve their communities.
However, the Act is not a widespread repeal of the Dodd-Frank Act, as some mistakenly believe. For example, it does not completely repeal the Volker Rule, although this was the original goal of some legislators.
Here are a few of the legislation’s main provisions that will affect community banks:
- The total consolidated asset threshold for compliance with certain prudential standards has been increased from $50 billion to $100 billion immediately. It will be increased to $250 billion 18 months after the Act’s implementation date.
- The total consolidated asset threshold for required periodic performance of internal stress testing has been increased from $50 billion to $250 billion.
- The total consolidated asset threshold to comply with the Federal Reserve’s Small Business Holding Company Policy Statement has been increased from $1 billion to $3 billion.
- The total consolidated asset threshold to qualify for an 18-month examination cycle by prudential regulators has been increased from $1 billion to $3 billion for banks that are well managed and well capitalized.
- Banks with less than $10 billion in total consolidated assets will be considered in compliance with capital and leverage requirements even if their tangible equity falls to an amount that causes their community bank leverage ratio to exceed 10 percent.
- Certain banks with total consolidated assets of less than $5 billion will be subject to reduced call reporting requirements.
Let us know if you have more questions about the Economic Growth, Regulatory Relief, and Consumer Protection Act.
