House scheduled to consider bills on Volcker rule limits, stress tests changes, FSOC reform

Three bills that affect financial institution regulation will be considered on the House floor this week, including a measure limiting the scope of the “Volcker rule” to banks with more than $10 billion in assets (similar to a provision already adopted by the Senate and House in separate financial institution regulatory reform bills) and two others on stress testing and the scope of the Financial Stability Oversight Council.

According to the weekly scheduled released by House Majority Leader Kevin McCarthy (R-Calif.) late last week, the House this week will vote Friday on H.R. 4790, the Volcker Rule Regulatory Harmonization Act, sponsored by Rep. French Hill (R-Ark.). The legislation would exempt banks with up to $10 billion in consolidated assets from the Dodd-Frank Wall Street Reform and Consumer Protection Act’s (Dodd-Frank) Volcker rule and authorize the Fed solely to promulgate related regulations. Primary federal regulators would retain examination and enforcement authority. The bill is similar to a provision of the Senate-passed S. 2155, the Economic Growth, Regulatory Relief, and Consumer Protection Act, as well as the House-passed H.R. 10, the Financial CHOICE Act.

On Wednesday, the House is scheduled to consider:

  • H.R. 4293, the Stress Test Improvement Act of 2017, sponsored by Rep. Lee Zeldin, R-N.Y., requires certain bank holding companies to conduct company-run stress tests once a year rather than semiannually. It also obliges the Federal Reserve to issue regulations subject to notice and comment for conducting stress tests that set forth economic conditions and methodologies; and to assess the effect of the agency’s stress-testing models and methodologies on financial stability, credit availability, model risks, and investment cycles. This bill also requires the Federal Reserve to issue regulations, subject to notice and comment, for its Comprehensive Capital Analysis and Review (CCAR) program. It provides that the Fed may not subject a bank holding company to its CCAR program more than once every two years; prohibits the Federal Reserve from objecting to a bank holding company’s capital plan based on qualitative deficiencies; and directs the Federal Reserve to establish procedures to respond to inquiries from bank holding companies subject to the CCAR program.
  • H.R. 4061, the Financial Stability Oversight Council Improvement Act of 2017, sponsored by Rep. Dennis Ross (R-Fla.), would require the Financial Stability Oversight Council (FSOC) to “evaluate the need to subject nonbanks to heightened prudential standards by the Federal Reserve and reevaluate annually and periodically, in coordination with the designated company and the appropriate prudential or market regulator, whether designated companies still pose a systemic risk to the financial system,” according to the committee report.

H.R. 4061 would also  require the FSOC, when identifying a non-bank financial company as a potential threat to the nation’s financial stability, to provide that company with a written notice explaining “with specificity” the basis for the designation and would require a copy of the notice to be provided to the company’s primary financial regulatory agency.

“For example, for an insurance company, the Dodd-Frank Act defines its primary financial regulatory agency as ‘the State insurance authority of the State in which an insurance company is domiciled,’” the committee report states. “Therefore, if the FSOC is considering the designation of an insurance company, H.R. 4061 would require the FSOC to notify the applicable state insurance regulator early in the designation process and would have an opportunity to address risks that the FSOC identifies.”

House Majority Leader’s weekly schedule (for week of April 9)