The agencies proposed changes to the way they apply a capital backstop to the largest systemically important firms, replacing a static leverage ratio with a more dynamic ratio that takes each bank’s risk profile into account.
Research Assistant for the Economic Policy teamCenter for American Progress
The Treasury secretary has suggested raising an asset cutoff used by the Financial Stability Oversight Council to assess systemically significant nonbanks, removing some hedge funds and other risky firms from the council's purview.
On quarterly earnings calls set to begin next week, investors will be listening closely to CEO comments for any hints of how banks might deploy excess capital if they are no longer deemed systemically important.
The biggest legacy of the current regulatory relief effort may be the increasing focus on whether organizing banks in supervisory buckets by asset size makes sense. Yet the bill deals with just one of the two big asset thresholds in the law.
While regulatory relief legislation would raise the asset threshold for “systemically important” banks, Federal Reserve Chairman Jerome Powell said the central bank could still apply prudential scrutiny to banks below that new cutoff.
A day after the Senate passed regulatory relief, top House Republicans vowed to have a big say in the final version before the bill heads to the White House. That raised fresh questions about how quickly the Dodd-Frank reforms will become law.