UPDATE: Major Financial Reform Bill Signed into Law

ABSTRACT: Promptly after the House approved S. 2155, The Economic Growth, Regulatory Relief and Consumer Protection Act, President Trump signed it into law, signifying what could be the most substantial change in law in the financial services industry since the inception of Dodd-Frank in 2010.

Today, President Trump signed into law S. 2155, The Economic Growth, Regulatory Relief and Consumer Protection Act. In doing so, President Trump stated, “the legislation I'm signing today rolls back the crippling Dodd-Frank regulations that are crushing small banks.”

In response to the new law, community lenders across the nation rejoice.  On behalf of Independent Community Bankers of America (the “ICBA”), President and CEO Rebeca Romero Rainey issued a statement that the “landmark law signed by the president today unravels many of the suffocating regulatory burdens our nation’s community banks face and puts community banks in a much better position to unleash their full economic potential to the benefit of their customers and communities.” 

Some of those regulations include stringent ability-to-repay evaluations, record retention requirements, reporting to regulators, and stress-testing under the authority of the Federal Reserve to determine the ability to withstand a financial crisis. Smaller banks and credit unions reportedly found these regulations to be unduly burdensome for them, given their relative size and resources for compliance. Perhaps the best evidence of this argument is the nearly 2,000 community financial institutions that ceased operations after the Dodd–Frank Wall Street Reform and Consumer Protection Act was enacted in 2010.

Critics of the Act, however, argue that the Act goes too far in deregulation.  According to some, decision to raise the “enhanced oversight” threshold from those banks with $50 billion or more in assets, to those with at least $250 billion, was too severe, and that such a large rollback in regulation could lead to the next major financial crisis in America.  Indeed, the Act provides a new standard for “too big to fail” that excludes nearly two dozen banks that were previously considered to be systematically important financial institutions.

Only time will tell the impact of this new legislation, but The Economic Growth, Regulatory Relief and Consumer Protection Act is being hailed as a win for Main Street by many.