The US Senate, with encoragement and not a little help from the Office of the Comptroller of the Currency, has introduced Senate Bill 2155, hailed in the press as the Dodd-Frank rollback bill, which aims to provide banks with tailored regulatory relief.

The bill is sponsored by both main American political parties and, if passed, is to be known as the Economic Growth, Regulatory Relief and Consumer Protection Act. Mike Crapo secured the vote of the Senate Banking Committee, which he chairs, to advance it in the Senate. The bill includes many features supported by the OCC, including an exemption for small banks from the Volcker Rule, a simpler capital regime for highly-capitalised community banks and a higher threshold for labelling institutions 'systemically important.' It is designed to modify parts of the Dodd-Frank Wall Street Reform and Consumer Protection Act and to help realise the promise of President Trump's Executive Order 13772 of 3rd February, which calls on the Treasury Department to earmark laws and regulations that clash with Trump's "core principles of financial regulation."

Section by section

Section 101, which deals with minimum standards for residential mortgage loans, provides that certain mortgage loans that are originated and retained in portfolio by an insured depository institution or an insured credit union with less than $10 billion in total consolidated assets should become qualified mortgages under the Truth in Lending Act (TILA), while taking away no 'protections' for consumers. Section 104 proposes to provide 'regulatory relief' to small depository institutions that have originated less than 500 closed-ended mortgage loans or less than 500 open-ended lines of credit in each of the two preceding calendar years by exempting them from certain disclosure requirements under the Home Mortgage Disclosure Act. It also directs the OCC to study the effect of this 'relief' on the amount of data available.

Section 201 promises 'capital simplification' for qualifying community banks, many of which provide private banking services. This section, if passed, will require federal banking agencies to establish a community bank 'leverage ratio' of tangible equity to average consolidated assets of 8-10%. Banks with less than US$10 billion in total consolidated assets that maintain tangible equity in an amount that exceeds the community bank leverage ratio will be deemed to be in compliance with capital requirements. Section 204 aims to permit certain funds to share the same name (or variation thereof) as their bank-affiliated investment advisors, which at the moment is illegal. Section 205 refers to short-form call reports and calls on the federal banking agencies to reduce reporting requirements for depository institutions with less than $5 billion in total consolidated assets that satisfy other criteria that those federal banking agencies deem appropriate.

Section 206 offers federal savings associations the option of operating as 'covered' savings associations. In other words, it aims to allow federal savings associations with less than $15 billion in total consolidated assets to elect to operate with the same powers and duties as national banks without being required to convert their charters. Section 210 wants to raise the consolidated asset threshold from $1 billion to $3 billion for well-managed and well-capitalised banks to qualify for an 18-month examination (regulatory visit) cycle.

There are to be higher prudential standards for certain bank holding companies, found in section 401, which proposes to raise the threshold for the application of 'enhanced' prudential standards from $50 billion to $250 billion. Bank holding companies with total consolidated assets between $50 billion and $100 billion are to be exempt from enhanced prudential standards as soon as the Bill is enacted and bank holding companies with total consolidated assets of between $100 billion and $250 billion ought to be exempt 18 months after the date of the Bill's enactment.

Section 501 calls for a Treasury report on the riskiness of cyber-threats. Section 502 calls on the Securities and Exchange Commission to produce a study of algorithmic trading and section 503 asks the Government Accountability Office to study various aspects of the consumer reporting industry.

'Eliminating burden'

In November President Trump appointed Joseph Ottinger, a lifelong banker, as the 31st Comptroller of the Currency. Ottinger is the first banker to be appointed to the post in 40 years. He was the president of CIT bank in 2015 and the CEO of OneWest Bank before that. His expertise is on the commercial rather than the private side of banking. Steve Mnuchin, the US Treasury Secretary, bought OneWest Bank when the financial crisis began in 2007/8. It was then a failed residential lender called IndyMac. He subsequently sold it to CIT Group in 2015 before running the Trump nomination campaign with Ottinger's help. In the 1990s Ottinger worked at the Union Bank of California and the Bank of America, moving to US Bancorp for a long tenure during the early years of this century.

The OCC employs 3,956 people, has a budget of US$1.2 billion and regulates 1,347 national banks, federal savings associations and federal branches of foreign banks. Ottinger recently told the press that every new comptroller has to go through a very complex, very detailed background review conducted by agents from the Federal Bureau of Investigation who interview friends, relatives, colleagues, neighbours and business associates. Under its new leadership the OCC is looking forward to "eliminating unnecessary regulatory burden."