Eight years after the financial crisis of the recession led to the passage of the Dodd-Frank act, President Donald Trump signed a bill into law rolling back some of the financial rules put in place by the landmark banking law.
The president signed the bipartisan bill on May 24, in a move that medium- and small-sized banks are calling a correction to the 2010 Dodd-Frank law that frees them from the regulations placed on banks labeled “too big to fail.”
The bill, called the Economic Growth, Regulatory Relief and Consumer Protection Act, passed through the U.S. House and Senate with support from both major political parties. In the Senate, Banking Committee Chairman Mike Crapo, a Republican from Idaho, and a group of Democrats on the panel, including Montana Sen. Jon Tester, introduced it in November.
Steve Turkiewicz, president and CEO of the Montana Bankers Association, said the rollback in regulations would serve Montana banks well.
“We anticipate that by tailoring the rules to the size and business model of the bank, the rules will be more appropriate for that size of bank,” Turkiewicz said.
The new law increased the classification of banks as “too big to fail” from $50 billion in assets to $250 billion. It also eases mortgage-loan date reporting requirements for most medium- and small-sized banks.
Financial institutions are split up in the bill by size, with rules tailored for banks and credit unions with varying levels of assets.
“Before, it was a one-size-fits-all approach,” Turkiewicz said.
Randall Chesler, president and CEO of Glacier Bancorp, said the changes for a bank of Glacier’s size are classified in a category of having assets worth between $10 billion and $50 billion.
“For us, it specifically does away with the requirement to do Dodd-Frank stress testing, which was an expense for us to do very sophisticated testing,” Chesler said last week. “A lot of these things were back-office requirements; we like to spend our time serving customers and investing in their experience rather than doing things they don’t really see.”
Chesler also said changes to Dodd-Frank are an important development in banking regulations, given that the original Dodd-Frank seemed untouchable.
“It’s a recognition that regulations sometimes shouldn’t be looked at being shrink-wrapped when they’re passed because times change and sometimes they need modifications,” Chesler said. “The fact that they took this step is really important.”
At Three Rivers Bank, chairman and CEO John King said as a member of the Independent Community Bankers of America, he’s been closely watching this issue develop.
His brother and bank president AJ King went to Washington D.C. to give input on the changes, King said, and Three Rivers sees the rule rollback as a boon to community banks across the country.
“It was to bolster rural America,” King said of the bill. “It’s going to spur more access to credit for small businesses and consumers.”
King said Montana’s congressional delegation should be applauded for working together on this issue, and that the changes could help spur economic development.
The stress tests were expensive, King said. When he was working in 1984, the bank spent about $10,000 in compliance-related measures. Last year, it was closer to $1 million.
With the regulatory relief, smaller financial institutions can get back to their original focus, King said, which is helping their communities grow.
“The big thing here is this will give us ways to lend for homes, businesses and farms,” King said. “And small businesses really drive the bottom line here. This bill is for community banks; it’s not for the too-big-to-fail banks.”