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Will SIFI Oversight Threshold Be Eliminated?

By Stephen Barlas
February 1, 2017
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Old bank sign engraved in stone or concrete above the door of financial building concept for finance and business

Freeing up bank loans to small- and medium-sized businesses is the motivating factor behind one piece of the Dodd-Frank Act likely to change quickly. That’s the threshold of $50 billion in assets over which the Financial Stability Oversight Council (FSOC) identified banks as Systemically Important Financial Institutions (SIFIs) and therefore subject to enhanced supervision and prudential standards by the Federal Reserve.

 

In December, the House passed a bill that would eliminate that threshold and substitute language giving the FSOC nonmonetary, somewhat subjective guidelines it could use to determine whether the bank could “threaten the financial stability of the United States.” The bill (H.R. 6392) passed the House by a vote of 254-161, so it had some Democratic support. It was unclear whether President Obama would have vetoed it had the bill passed the Senate during the lame duck session in 2016. Now with the Trump administration in place, it will very likely pass. The U.S. Chamber of Commerce strongly backs the bill because it thinks the ironclad $50 billion threshold arbitrarily catches regional and community banks, which play a vital role in providing liquidity and financing to Main Street businesses.

 

Stephen Barlas has covered Washington, D.C., for trade and professional magazines since 1981 and since 1984 for Strategic Finance and its predecessor Management Accounting. You can reach him at sbarlas@verizon.net.
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