On July 6, the Federal Reserve Board, Federal Deposit Insurance Corporation, and Office of the Comptroller of the Currency (together, the Agencies) issued an interagency statement (Statement) regarding the impact of the recently enacted Economic Growth, Regulatory Relief, and Consumer Protection Act (the tongue-tying EGRRCPA), which we previously summarized. The new law amended the Dodd-Frank Act to streamline certain of its systemic regulation requirements, and provide a modest level of relief for midsized banks and community banking institutions. The Statement addressed some of the immediate impacts of EGRRCPA and the Agencies’ responses to those provisions that took effect immediately. The Federal Reserve Board also issued a separate conforming statement addressing the impact of EGRRCPA on bank holding companies subject to its supervision (FRB Statement).
Among other things, EGRRCPA increases the Dodd-Frank Act enhanced prudential supervision threshold for bank holding companies with $50 billion in total consolidated assets by exempting bank holding companies with total consolidated assets of less than $100 billion immediately upon enactment (May 24, 2018), and raising this threshold to $250 billion 18 months after the date of enactment (November 25, 2019). EGRRCPA also allows the application of any enhanced prudential standard to bank holding companies with between $100 billion and $250 billion in total consolidated assets.
Specifically, the Statement says, among other things:
- Bank holding companies with consolidated assets of between $10 billion and $100 billion have until November 25, 2019, to comply with the company-run stress-testing requirements, at which point the EGRRCPA exemption for such stress testing goes into effect.
- The Agencies in substance no longer will require bank holding companies with assets of less than $250 billion to comply with the resolution plan, or “living will,” requirements.
- The Agencies no longer will enforce the Volker Rule against banking entities with less than $10 billion in assets, but will address the relevant EGRRCPA provisions in a separate rulemaking.
- The regulatory capital requirements applicable to high volatility commercial real estate (HVCRE) exposures will be applied only to exposures that are acquisition, development, and construction (ADC) loans within the meaning of the new law.
- Well-capitalized depository institutions of greater than $3 billion in assets will be eligible for an extended 18-month examination cycle, pending the Agencies’ new rulemaking.
- Pending new rulemaking, the Agencies will not enforce the requirements of the liquidity coverage ratio (LCR) regulations that currently exclude municipal obligations from the definition of high-quality liquid assets.
- The EGRRCPA exemption for rural property appraisal transactions with values of less than $400,000 is immediately effective.
In the FRB Statement, the Federal Reserve Board also says, among other things, that effective immediately, it will not enforce the Dodd-Frank Act enhanced prudential supervision standards of Federal Reserve Board Regulation YY, the liquidity coverage ratio requirements of Federal Reserve Board Regulation WW, or the capital planning requirements of Federal Reserve Board Regulation Y against bank holding companies with consolidated assets of less than $100 billion.
The Agencies’ statements on these matters are straightforward and indicative of an intention to be responsive to the requirements of the new statute. We can expect further regulatory action to be taken by the Agencies (such as further amendments to the Volcker Rule regulations consistent with EGRRCPA) in the coming months, but the Statement is a meaningful step in the direction of tailoring the requirements of the Dodd-Frank Act in a more risk-based manner.