In June 2017, the U.S. Department of the Treasury released a 150-page report responding to President Donald J. Trump’s executive order for regulatory change in the financial system. Titled “A Financial System That Creates Economic Opportunities—Banks and Credit Unions
,” it is the first in a series of four reports expected this year. This installment covers the depository system (including banks, savings associations, and credit unions of all sizes, types, and regulatory charters).
Treliant’s Steve Bartlett
, Senior Advisory Board Member, James R. Causey
, Senior Director, and Grace E. Chang
, Analyst, have prepared a “summary of the summary”: a ten-page simplified version of the Treasury’s 150-page report. This summary is certainly not a substitute for the official pronouncement—nor does it intend to change the meaning of the Treasury’s original report.
Each of the 45 recommendations is important. Several highlights that caught the authors' attention include:
Authorize the Financial Stability Oversight Council (FSOC) to designate a lead regulator when overlapping jurisdictions occur
Use a common lexicon for cybersecurity
Raise triggering thresholds governing banks from $10 billion to $50 billion, for Dodd-Frank Act Stress Tests (DFAST) and other requirements
Raise the Living Will and Comprehensive Capital Analysis and Review (CCAR) thresholds significantly from $50 billion
Provide increased transparency around these regulatory Stress Testing, Living Will, and Capital Planning frameworks
Require collective cross-agency requirements for boards of directors
Reduce compliance burdens under the Volcker Rule, which limits banks’ investment activities
Make the director of the Consumer Financial Protection Bureau (CFPB) more accountable to the president, and make other structural reforms to the bureau (may require legislation)
Make significant and multiple changes to CFPB Mortgage Origination Rules, including Qualified Mortgage loans (some will require legislation)
Base Foreign Banking Organizations’ enhanced prudential standards and Living Will requirements on their respective U.S. risk profiles rather than their global consolidated assets
Banks and credit unions should not conclude that these reforms are a reason to de-emphasize compliance. On the contrary, while these reforms will likely make the regulatory and enforcement landscape somewhat more orderly and business- friendly, banks and credit unions should expect the ongoing regulatory emphasis on conduct, culture, and compliance to be strictly enforced.
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