President signs into law Dodd-Frank relief for community banks

On Thursday, President Trump signed a bipartisan—but still controversial—bill, easing the Dodd-Frank Act’s regulatory burden on community banks.

The Economic Growth, Regulatory Relief, and Consumer Protection Act provides, among other things: exemptions to mortgage lending rules; regulatory relief for community banks, bank holding companies, and securities regulations; consumer protections for veterans and certain homeowners; and protections for student loan borrowers.

“Community banks are the backbone of small business in America. We are going to preserve our community banks,” Trump said at the Oval Office signing ceremony. The bill provides “commonsense regulatory relief for community banks, mid-sized banks, regional banks, and credit unions.”

“The legislation will better tailor regulations to the risks posed by these institutions, improving the safety and soundness of the regulatory system,” he added. “[It] removes certain regulations that impede the ability of these institutions to serve the financial needs of consumers. Small community banks have been unfairly and disproportionately harmed by Dodd-Frank, compared to big banks, which can use their substantial resources to navigate Dodd-Frank’s costly and complex regulations.”

As a result, President Trump said, the number of community banks in the United States has decreased by 2,000 since 2010, according to statistics from the Federal Deposit Insurance Corporation.

Earlier this week, the House of Representatives voted 258-159 to pass the legislation. The House vote follows a March 15 vote in the Senate, 67 to 31, which had approved its version of the bill to loosen Dodd-Frank regulations on banks with up to $250 billion in assets.

A centerpiece of the legislation is that it raises the threshold for applying enhanced prudential standards from $50 billion to $250 billion.

Bank holding companies with total consolidated assets between $50 billion and $100 billion will be exempt from enhanced prudential standards immediately, and bank holding companies with total consolidated assets between $100 billion and $250 billion will be exempt 18 months after the date of enactment.

For bank holding companies with total consolidated assets between $100 billion and $250 billion, the Federal Reserve will have the authority to apply enhanced prudential standards after the effective date, be required to conduct a periodic supervisory stress test after the effective date, and have the authority to exempt firms from enhanced prudential standards prior to the effective date.

The bill also raises the threshold for company-run stress tests from $50 billion to $250 billion.