| The biggest winners in the Senate’s proposed Dodd-Frank Act relief bill would be banks that have not yet crossed the $50 billion threshold, and not yet incurred the additional compliance costs that accompany that threshold.
That’s according to a recent analysis by Keefe, Bruyette & Woods, a New York City investment banking firm that holds shares in many community and regional banks in the Northeast.
Called the Economic Growth, Regulatory Relief and Consumer Protection Act, the proposal would raise the threshold for the size of an institution that regulators “deem too big to fail.” Currently, that threshold is $50 billion in assets; the new threshold would be $250 billion.
The proposal would also end stress testing entirely for banks with under $100 billion in assets, simplify capital calculations for community banks and provide some relief on the Volcker rule for banks under $10 billion in assets, among a host of other provisions.
The proposal would also end stress testing entirely for banks with under $100 billion in assets, simplify capital calculations for community banks and provide some relief on the Volcker rule for banks under $10 billion in assets, among a host of other provisions.
No matter how big or small, all banks have incurred expenses to comply with Dodd-Frank. But in Connecticut, only People’s United Bank, which has more than $43 billion in assets, and Webster Bank, which has over $26 billion in assets, have likely incurred expenses for stress testing. With $7 billion in assets, it is possible United Bank has begun stress testing preparation, although executives made no mention of it in their latest earnings call.
The KBW report also states that raising the $50 billion threshold could have positive implications for bank merger and acquisition activity.
“It could promote a more open/natural consolidation cycle relative to the past several years,” the report said. “In fact, if the proposed changes are enacted it is possible we see a bank cross the $50 billion mark via M&A … and also possible we see more banks consider mergers of equals without the current hindrance of today’s thresholds.”
The bill has bipartisan support and stands a good change of passing in early 2018, according to KBW.
“During the course of the markup, several Democrats who oppose the bill offered myriad amendments. They were all rejected by the committee’s Republicans and the Democrats who support the Crapo bill,” the report said. “This is significant because it shows that the careful alliance Senate Banking Committee Chairman Mike Crapo (R-ID) built with a group of centrists Democrats remained unified.”
