WASHINGTON — A bipartisan Senate bill could give regional banks hope that they may eventually be able to shed the systemically important financial institution designation that subjects those with more than $50 billion of assets to tougher regulatory requirements.

The bill, introduced Thursday, is being sponsored by Sens. David Perdue, R-Ga., and Claire McCaskill, D-Mo., and mirrors legislation introduced in the House by Rep. Blaine Luetkemeyer, R-Mo., that has 29 Republican and 13 Democratic co-sponsors.

It would remove the $50 billion asset threshold established by the Dodd-Frank Act and replace it with an indicator test that focuses on measures including size, interconnectedness, cross-border activities and complexity. The Federal Reserve Board uses a similar calculation to determine the risk a bank poses.

Sen. Claire McCaskill, D-Missouri
“When even some of the architects of Dodd-Frank agree the law is unnecessarily burdensome on regional banks, you know we’ve got a problem on our hands,” said Sen. Claire McCaskill, D-Missouri. Bloomberg News

The legislation would give the Financial Stability Oversight Council the ability to redesignate firms as systemically risky, and the eight megabanks that are already considered globally systemic would continue to be held to higher regulatory requirements.

“This legislation would actually test banks for systemic risk rather than forcing banks to comply with an arbitrary figure,” Perdue said in a press release.

McCaskill also pointed to remarks by former House Financial Services Committee Chairman Barney Frank, D-Mass., who acknowledged that the $50 billion asset threshold might not be the best measure to delineate between which banks should be subject to tougher regulations.

“When even some of the architects of Dodd-Frank agree the law is unnecessarily burdensome on regional banks, you know we’ve got a problem on our hands,” McCaskill said in the release.

During a July Senate Banking Committee hearing, Fed Chair Janet Yellen said she would be open to making adjustments to the SIFI threshold.

“If Congress sticks with a dollar threshold … we would support some increase in the threshold,” Yellen said. “An approach based on business model or factors is also a workable approach from our point of view.”

Senate Banking Committee Chairman Mike Crapo, R-Idaho, who has been leading efforts to craft a package of bills that focus on economic growth and regulatory relief, may seek to include provisions targeting the SIFI threshold. He is still working on a bill with Sen. Sherrod Brown, the top Democrat on the panel, whose home state of Ohio includes a number of large regional banks.

Other Democrats on the committee, including Sen. Heidi Heitkamp, D-N.D., have said they would like to strike a deal that provides regulatory relief to community financial institutions and regional banks alike but doesn’t go too far in restructuring Dodd-Frank.

“I am optimistic that we can get something forward this year to try and get a real compromise to move through Congress, [but] not one that overreaches,” Heitkamp said at a recent credit union event.

Still, some analysts were not as hopeful for quick action.

"We do not see a window for Congress to enact legislation raising the SIFI designation level until next summer at the earliest, with the most likely window occurring during the lame duck session between the mid-term election in November 2018 and the swearing in of the new Congress in early January 2019," wrote Jaret Seiberg, an analyst with Cowen Washington Research Group.

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