Bank Regulatory Relief Finally Passes Congress

Written by Robert Taylor, LBA Chief Executive Officer 

The first item to note as you read about the passage and signing into to law of the Economic Growth, Regulatory Relief and Consumer Protection Act is that it happened due to the continuous active involvement of bankers from across the country in a sustained way since the passage of Dodd-Frank in 2010. Since then, Louisiana has 39 fewer banks domiciled in Louisiana. We all should be hopeful bankers will feel renewed and optimistic enough to grow prosper, and may even see some de novo banks. These are some of the provisions in the legislation: 

  1. Automatic qualified mortgage status for mortgages held in portfolio for banks under $10 billion in assets. 
  2. Escrow relief for those $10 billion and below on mortgages that make fewer than 1,000 first lien mortgages annually on principal dwellings. 
  3. Relief from new Home Mortgage Disclosure Act data collection and reporting for lenders that originate fewer than 500 closed-end mortgage loans or fewer than 500 open-end lines of credit will be exempt from the new Dodd-Frank data fields. 
  4. Relief from Basel III capital rules for community banks with less than $10 billion in assets with a leverage ratio of between 8% and 10%, to be determined by banking agencies. Most of Schedule RC-R- Regulatory Capital of the Call Report would not apply. None of the capital rules on high volatility commercial real estate lending, mortgage servicing rights, deferred tax assets and trust preferred securities would apply to you. 
  5. Create “short form” call report for use in first and third quarters of each year by well-rated banks with assets of less than $5 billion. 
  6. Volcker Rule exemption for banks with assets of less than $10 billion and trading assets of less than 5% of total assets. 
  7. Appraisal requirement exemption in areas with a scarcity of licensed appraisers for rural portfolio loans of less than $400,000. 
  8. TRID relief that provides no more three-day waiting period when a lender extends a second offer with a lower APR. 
  9. An 18-month exam cycle for well-managed, well-capitalized banks up to $3 billion in assets. 
  10. Provides federal savings institutions with assets of $20 billion or less can elect to operate with national bank powers without changing charters. 
  11. Certain reciprocal deposits will not be considered brokered deposits provided they do not exceed the lesser of $5 billion or 20% of the banks liabilities. 
  12. Banking agencies are directed to classify investment-grade municipal bonds as level 2B liquid assets under the LCR rule. 

We should view this as a down payment of additional actions in D.C., especially among the federal banking agencies. 

With this accomplishment, we need to look to the next one, which must have you the banker at the forefront. LBA’s annual Washington Visit is July 10-12. Think of those bankers who are emerging leaders and the necessity of showing them the importance of being active in the fight for common-sense regulation and supervision. Progress does not occur in a vacuum, but as a reaction to bankers telling their story, time and again. Please be a part of the work to keep community banking vibrant, join us in D.C.!