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Senate Banking Committee advances regulatory relief bill

Thursday, on a party line vote, the Senate Banking Committee advanced a major regulatory relief bill for consideration by the full Senate. The vote on the Financial Regulatory Improvements Act of 2015 was 12-10. Earlier a much more restricted version offered by the Democrats was defeated along partisan lines, 10-12.

"It was a case of partisan posturing, although I'm not certain who was the intended audience," OBA President Roger Beverage said. "It surely wasn't community bankers across the country."

Beverage said the bill has eight titles, but the key title is the first one that deals with regulatory relief that would be beneficial for community banks.

"The problem is at least two-fold," Beverage said. "First, the president has said he will veto a 'package' that revises Dodd-Frank. This bill, at least according to the Democrats, does that.

"Second, this bill in many sections applies to banks of all sizes, not just community banks. That pours gasoline on an already-blazing 'big bank fire' which will flare up even more during the debate and final vote. If we don't get a bipartisan majority in both houses, then nothing is going to be signed into law.

"We have this one shot to get something done. I'm doing everything I can to make sure we get as much relief as possible in a bill that will have bipartisan support and that the president will sign. That's not an insignificant task, to be certain."

Here's a quick run-down of the bill's contents:

Title 1: Among some of this Title's key provisions are the following:

1. Section 106: QM Safe Harbor for Loans Held in Portfolio. Any loan originated by a bank or credit union and held in the creditor's portfolio, or a portfolio loan that is later acquired and also held in portfolio, would be treated as if it were a Qualified Mortgage (QM).

a. Certain types of loans would not be eligible for such treatment including those containing negative amortization, interest-only, and no documentation loans.
b. Additional language requires the appropriate Federal banking agencies to periodically review mortgage portfolios of systemically important banks if there is elevated risk, an increase in delinquencies and for other circumstances.

2. Section 101: Provides an exception to the Annual Written Privacy Notice Requirement under Gramm- Leach-Bliley;

3. Section 103: Designation of Rural Area — This section directs the CFPB to establish a process under which a person who lives or does business in a state may apply to have an area in the state identified as a "rural" area if it has not yet been so designated by the CFPB for purposes of federal consumer financial law;

4. Section 104: Creates an examination ombudsman, similar to the appeal provisions of H.R. 1941 and S.774 noted above;

5. Section 109: Provides for streamlining bank exams by increasing the number of well-rated smaller community banks that qualify for the 18-month on-site exam cycle by increasing the current asset threshold of $500 million to $1 billion;

6. Section 119: This section permits highly-rated community banks to submit a short-form call report in the first and third quarters of each year;

Title 2: Deals with systemically important bank holding companies. Among other things, it establishes a new process the FSOC must utilize to designate bank holding companies as "systemically important." Under this provision, the Fed and the FSOC would evaluate banks between $50 billion and $500 billion for systemic risk designation, based on certain criteria.

• Importantly, Section 204 sets forth the sense of Congress that federal financial regulatory agencies should seek to properly tailor prudential regulations.

Title 3: This title deals generally with providing more transparency within the FSOC process when identifying non-bank financial entities.

Title 4: Among other things, Congress reaffirms that the McCarran-Ferguson Act of 1945 remains the preferred approach to regulating the business of insurance.

Title 5: The title deals with "improvements" to the Federal Reserve System. Requires the president to appoint the president of the New York Fed, for example.

Title 6: Provides for changes to the SEC's process in an effort to improve access to capital and requires more tailored regulation in the financial markets.

Title 7: Deals with revisions to processes utilized by Fannie and Freddie, including the disposition or sale of the entities' preferred stock without congressional approval; provides for a common securitization platform and mandatory risk-sharing.

Title 8: - Makes technical corrections to non-substantive provisions included in error when Dodd-Frank was passed.

"Most of Democrats indicated a willingness to work with the Republicans," Beverage said. "The one notable exception was Sen. (Elizabeth) Warren. I just don't understand what's happened to change her mind so radically. Maybe Boone Pickens can help us talk to her, but I'm stumped at this point. We'll just have to keep swinging, which I fully intend to do."


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