Regulatory relief legislation that could benefit large and small financial institutions may advance next year, even though banking issues overall are likely to be a low priority in the new Congress, experts said at an American Banker conference Monday.
There is a growing bipartisan consensus that the definition of a systemically important financial institution needs to be changed, according Dwight Fettig, a partner at Porterfield, Lowenthal, Fettig & Sears.
Large institutions with $50 billion or more assets are considered "too big to fail," and some lawmakers want to raise that number or draft other criteria so that midsize banks are not overly burdened relative to their riskiness.
"It feels to me there is some coalescing around that, and it could provide a vehicle for regulatory relief," Fettig said Monday at American Banker's 4th Annual Regulatory Symposium.
Initial momentum could be stronger in the Senate.
Political analysts expect either Sherrod Brown, D-Ohio, or Richard Shelby, R-Ala., will likely be the Senate Banking Committee chairman next year, depending on whether Democrats maintain control of the Senate in the midterm elections this fall.
Brown has been interested in "too big to fail" and community bank issues. The liberal Democrat has been critical of the industry, but in recent months has taken a more pragmatic approach to financial services issues.
He spearheaded a proposal with several Republican lawmakers to tweak capital requirements for insurance companies and raised concerns that some relatively uncomplicated regional banks are being classified as systemically important.
Shelby was the chairman of Senate Banking from 2003-2007, and he has over the years raised concerns about concentration of risk in the banking system and the needs of community banks.
Beacon Policy Advisors LLC partner Brandon Barford said that Shelby is up for reelection in 2016 and would be interested in holding oversight hearings on Consumer Financial Protection Bureau issues such as the bureau's new initiative to address auto lending issues.
"A big focus will be regulatory relief but in a more populist manor," Barford said. "So he can show the consumers in his state that this legislation will directly help them or the banks in Alabama."
Several senators on the committee also serve on the appropriations committee, including Brown and Shelby.
The head of Citi's government affairs unit Candi Wolff noted appropriators generally work well together.
Regulatory reforms could also be inserted in an appropriations bill, if a reform bill is being blocked from reaching the Senate floor.
"If regular order becomes complicated, appropriations becomes a possible vehicle," Wolff said.