In addition to changing a regulatory requirement for some of the largest U.S. banks, the recently passed Senate banking reform bill could make it easier and less expensive for small banks to do business. In this clip, Michael Douglass and Matt Frankel discuss some of the changes that could be in store for community banking institutions.
A full transcript follows the video.
This video was recorded on March 19, 2018.
Matt Frankel: There are a few other smaller changes that this bill would make that are worth mentioning. One, it would end the Volcker Rule for smaller banks, which was designed to prevent speculation. Proprietary trading is a big thing in the Volcker Rule, and banks are currently damned from doing that, for the most part. This would roll that back for smaller institutions.
It would also reduce capital requirements on banks that are known as custody banks. These are banks like Bank of New York Mellon, State Street Financial is a big one, that are kind of holding custody assets for pension funds and mutual funds, things of that nature. They would have lower capital requirements. It would ease mortgage regulations for smaller banks. And for the consumers, a big win, credit bureaus Equifax, Experian and TransUnion would be required to freeze people's credit for free. Currently, that costs about $10 per bureau depending on where you live. So, this is a big win for consumers, especially in the wake of that big Equifax breach that we saw last year.
Michael Douglass: Yeah, and it's interesting, because when you look at the bill, one of the comments that a lot of people who are opposed to the bill will say is, they say it's about community banks and small banks, but really, a lot of the big benefits are to fairly large banks, your $50-250 billion asset groups. And that's fair enough. That's a really, really big benefit to those groups. But, there's also a lot of stuff here that's designed to help small banks. And to be clear, it's probably needed. Community banks are on the decline. There are about a third fewer today than there were about a decade ago, according to The Economist. So, that's a big thing. Hopefully this will help provide them with some more stability and a better place to compete.