Legislation Reintroduced to Base SIFI Determination on Risk Rather Than Asset Size
On July 19, Representative Blaine Luetkemeyer (R-Mo.) reintroduced legislation designed to overhaul the process used to manage systemic risk by basing the regulation of financial institutions on risk rather than asset size alone. As set forth in a press release issued by Rep. Luetkemeyer’s office, the Systemic Risk Designation Improvement Act of 2017 would replace the $50 billion threshold for designating a bank holding company as a Systemically Important Financial Institution (SIFI) with a series of standards for evaluating risk. The legislation would require the Federal Reserve to evaluate an “institution’s size, interconnectedness, substitutability, global cross-jurisdictional activity, and complexity” before designating it as a SIFI. The legislation was previously introduced in the House, but discussion was delayed to provide Rep. Luetkemeyer with time to propose a method for funding the proposed changes, which are estimated to cost more than $115 million. (See previous InfoBytes summary here.)
“This legislation supports economic growth throughout the country because it will free commercial banks to make loans while allowing financial regulators the ability to apply enhanced standards on banks based on actual risk posed to the financial system–rather than on arbitrary asset size alone," Luetkemeyer pronounced.