One month later, public impact of regulatory relief legislation with regulators is limited

It has been more than one month since President Donald Trump signed into law the Economic Growth, Regulatory Relief, and Consumer Protection Act (S. 2155), a measure widely touted by financial institutions as “major regulatory relief legislation.”

Since then, regulator action implementing the legislation – which largely went into effect the day it was signed by the president (May 24), and which was aimed at providing relief from federal financial institution regulation relief for banks and credit unions – has been limited to one: a rule change by the National Credit Union Administration (NCUA).

As of June 5, based on action taken by its board via notation vote May 30, just a week after Trump signed the bill into law, NCUA revised one of its rules to conform with the new statute. The change affected how commercial loans (loans to members for business purposes) are counted against a statutory cap on business lending at credit unions. The new law allowed credit unions to effectively exclude all loans made on any 1-to-4-unit family dwelling from a federally insured credit union’s member business loan MBL cap.

When NCUA announced its board vote on the rule change, it was the first and only federal financial institution regulator to revise a regulation in response to the new law. Based on publicly available information, it remains the only one to do so.

It’s true that the legislation includes a number of hard-wired “effective dates” of provisions in the legislation. These deadlines run from 30 days after the June 23 enactment date to 18 months after (November 2019). But many other portions of the law, including the credit union business-loan rule change, had no hard-wired dates and took effect upon the president’s signing of the legislation.

NCUA made the change to its business-loan rule to ensure its regulations conformed to the new law.

Also effective now is a provision exempting “community banks” from the so-called Volcker Rule. Under the bill’s section 203, “Community Bank Relief,” banks with total assets of less than $10 billion, and trading assets and liabilities comprising not more than 5% of total assets, are no longer subject to the rule. (The rule, part of the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act, places limits on proprietary trading and hedge fund and private equity investments at banks.)

None of the federal banking agencies – the Federal Reserve, Federal Deposit Insurance Corp. (FDIC), or the Office of the Comptroller of the Currency (OCC) – has yet to offer any guidance to supervised institutions, and none has announced any changes made (or proposed) to existing rules regarding the statutory Volcker Rule exemption.

The banking and trading market regulators do have a proposal out for comment that would revise the Volcker Rule, but the agencies have made clear that the proposed revisions do not reflect changes enacted by S. 2155. Instead, they said a later rulemaking will address the statutory changes and that the Volcker Rule, in the interim, will not be enforced “in a manner inconsistent” with the new law.

Outside of that, no other banking rule changes have been made, much less proposed, in response to the new law by the regulators, including the Bureau of Consumer Financial Protection (BCFP, formerly known as the CFPB). Based on a review of each website of the regulatory agencies, no other action has been noted by regulators.

This dearth of action has led at least one trade group for financial institutions, the Credit Union National Association (CUNA), to write to a regulator and request that it start making changes in response to the law.

The trade group noted that the new law includes several provisions affecting credit unions (as well as other financial institutions) and their service to their members and customers.

“However, the relief afforded by the legislation will not occur until implemented by the Bureau and other federal financial regulators,” wrote Ryan Donovan, chief advocacy officer for the group. “Thus, we urge the Bureau to allocate the resources necessary to ensure the regulatory changes under S. 2155 are quickly promulgated.”

CUNA letter to BCFP Acting Director Mick Mulvaney on S. 2155 response