White House calls for rollback of banking rules
Easing of ‘stress tests’ for banks under review
WASHINGTON: The White House on Monday issued a road map for loosening US banking regulations, including a recommendation to ease “stress tests” for large banks, according to a report published by the Treasury.
President Donald Trump requested the report in a February decree aimed at reducing the financial regulations imposed by the Dodd-Frank financial regulation law, adopted after a meltdown of the US mortgage market triggered the global financial crisis of 2008-2009.
“A sensible rebalancing of regulatory principles is warranted in light of the significant improvement in the strength of the financial system and the economy,” the Treasury said.
The 150-page report will feed into Senate debates about gutting DoddFrank, which toughened bank regulations, prohibited federally insured banks from engaging in risky trading and established the Consumer Financial Protection Bureau (CFPB) to oversee credit cards, mortgages and other financial products, among other measures.
While they do not call for scrapping the entire law, the new measures would implement a series of far-reaching changes, especially over the supervision of large banks.
The report calls for the size threshold at which banks are administered stress tests — which measure how they would weather possible economic shocks — to be increased from the current $50 billion in assets, even for foreign banks. The recommendations do not provide a level.
Some tests should be conducted every two years instead of annually, the report also said.
The Treasury also set its sights on the CFPB, saying it requires a “significant restructuring.”
The agency “was created to pursue an important mission, but its unaccountable structure and unduly broad regulatory powers have led to predictable regulatory abuses and excesses,” it said, recommending the president be given the power to fire its director.
The new proposals also target the Volcker rule — which prohibits banks that make loans and collect consumer deposits from making risky deals with their own funds. The regulation should no longer apply to mid-size banks with less than $10 billion in assets, the report says.
It would also require “living wills” — which lay out how a bank would wind itself down in the case of failure without damaging the entire financial system — to be submitted every two years instead of annually.
Last week, the House of Representatives passed an even more far-reaching act to gut banking regulations by calling for the elimination of many of the provisions of the Dodd-Frank law.
It passed without the backing of Democrats, whose support will be required for any measure adopted by the Senate.