2018/2019 Edition of the Global Regulatory Update

Global Regulatory Update  | Corporates Edition 53 U.S. 1) U.S. Regulatory Reform / Deregulation In the last edition of this guide we considered what the U.S. regulatory landscape will look like under President Trump and we covered 2 developments an indication of the direction of travel, namely the ‘The Financial Creating Hope and Opportunity for Investors, Consumers and Entrepreneurs (CHOICE) Act’ and the ‘A Financial System That Creates Economic Opportunities: Banks and Credit Unions’ report. So what developments have taken place since our last publication? The CHOICE Act was never brought up for vote in the Senate, nor was it really expected to be (as signaled in our earlier guide) as it was too deregulatory for passage. However, on 24 May 2018, President Trump signed into law the Economic Growth, Regulatory Relief and Consumer Protection Act (EGRRCPA). This was a Senate-originated regulatory relief bill that was much less aggressive than the CHOICE Act passing out of the House. It was a bipartisan bill, which was remarkable given the current political environment in Washington DC. Part of the compromise to get the House to agree to the bill with no amendments was that Representative Hensarling, the head of the House Financial Services Committee and lead on the CHOICE Act, was promised that “parts” of his CHOICE Act could be brought to the Senate at some point. In other words, the entire CHOICE Act would be broken into its components and those with a chance of passage in the Senate (i.e., bipartisan) might be brought to a vote in the Senate. We don’t think, at this point, anything more will happy on this during 2018, and Rep. Hensarling is retiring after the midterm elections in November 2018. The EGRRCPA is primarily focused on regulatory relief for small and community banks, not global systemically important banks (GSIBs) or other large banks. In some cases, the legislation is automatically effective; in other cases, where necessary, the U.S. banking agencies will need to implement the required changes via regulatory change. Generally, EGRRCPA raised the application of “enhanced prudential standards” in The Dodd-Frank Wall Street Reform Consumer Protection Act of 2010 from $50 billion to $250 billion in consolidated assets, and gives the U.S. Federal Reserve Board discretion to apply the standards to banks with assets between $100 billion and $250 billion. The EGRRCPA also provides welcome relief to certain community banks across a wide range of regulatory requirements, e.g., capital and leverage ratios, Volcker Rule and examination cycles. Some of the provisions we have been following include: