Industry Groups Praise Hensarling’s Dodd-Frank Replacement Plan Ahead of Markup

The American Bankers Association in a memo to lawmakers Monday praised several provisions in House Financial Services Committee Chairman Jeb Hensarling’s Dodd-Frank replacement plan, the Financial CHOICE Act, which is set to be marked up on Tuesday.

James Ballentine, the group’s executive vice president for congressional relations and political affairs, said ABA supports several aspects of the measure, H.R. 5983, aimed at regulatory relief. He highlighted provisions such as one requiring regulators to tailor rules based on an institution’s business model and risk profile and another that would raise the Federal Reserve’s Small Bank Holding Company threshold from its current level of $1 billion to $5 billion in consolidated assets.

However, ABA said that one of Hensarling (R-Texas)’s signature proposals — an “off-ramp” exempting banks with a leverage ratio of 10 percent from some regulatory requirements — needs more analysis.

“H.R. 5983’s move to incorporate a well-understood GAAP accounting standard for capital measurement significantly reduces the compliance complexity associated with the draft proposal,” Ballentine wrote. “We commend the sponsors for taking this action, but questions remain about additional aspects of the capital proposal that may unnecessarily limit the benefits of the approach to hundreds of well-run banks of all sizes, including many community and mid-size institutions.”

He cited regulatory burdens as one cause of the collapse of 1,708 banks, mainly community institutions, since July 2010, when Dodd-Frank was enacted.

The Electronic Payments Coalition also showered praise on Hensarling’s bill. Both ABA and the Electronic Payments Coalition have advocated for eliminating Dodd-Frank’s limitations on credit card swipe fees, a provision commonly referred to as the “Durbin Amendment” after its lead advocate, Sen. Dick Durbin (D-Ill.).

The Financial CHOICE Act would repeal the Durbin Amendment, which led EPC Executive Director Molly Wilkinson to call the legislation “the right thing to do for consumers and small community banks and credit unions.” She made the remarks Monday in a letter to Hensarling.

Retail groups, however, are strong and influential advocates for preserving the Durbin Amendment. In June, National Retail Federation Senior Vice President and General Counsel Mallory Duncan said in a statement that repeal would “would double the fees that banks charge retailers and their customers when they use a debit card to pay for purchases.”

ABA also supports legislation sponsored by Rep. Blaine Luetkemeyer (R-Mo.) that would require the Financial Stability Oversight Council to establish a process to formally deem individual institutions systemically important, the memo says. The Financial Services Committee approved that measure, H.R. 1309, November in a 39-16 vote. Hensarling’s plan would end the process of designating non-bank firms “too big to fail.”

Norbert Michel, a research fellow in financial regulations at the conservative Heritage Foundation, also made his case for the bill in a Monday piece published in Forbes, countering Dodd-Frank supporters’ argument that the legislation feeds Wall Street risk-taking and saying the bill aims to relieve commercial banks, not investment banks.