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Regulatory Relief Bill Slowly Taking Shape in House

Mon, Jun 3, 2013

Washington, District Of Columbia

"If you think that Congress isn't in the mood to relax laws (governing financial institutions) post-crisis, think again," commented a senior Republican House Financial Services aide.  "There are reg. relief items outside of the Dodd-Frank orbit that can and should be looked at, non-controversial items, and that's what we're doing."
Congressional staffers point to last year's ATM placard law as a model for cooperation between credit unions and banks on a bill that benefits both industries.  So far this year a bill eliminating duplicative privacy notice mailings passed the House unanimously and awaits action in the Senate.
The House Financial Services Committee took the first concrete steps toward easing regulatory burdens in a series of April hearings, first for credit unions and then for community banks.  Credit union trade associations offered a wide-ranging set of regulatory relief options, some controversial such as increased member business lending authority and the ability of credit unions to accept supplemental forms of capital, and some considered more broadly applicable to all financial institutions.  These included relief on onerous international remittance rules, easing of Qualified Mortgage (QM) restrictions and elimination of an arbitrary cap on transfers from savings to checking accounts currently imposed by the Federal Reserve.
Similarly, community banks proposed a list of items that would eliminate targeted regulations.  While these proposals also address QM, and target relief for real estate settlement procedures and escrow levels, there are contentious capital relief provisions dealing with Basel III capital standards that are certain to meet with resistance. 
According to Committee staff on both sides of the aisle, drafting is underway on this less controversial regulatory relief bill that incorporates the "low hanging fruit" suggested by both credit unions and banks at their respective hearings.  Republican staff involved in the process are pointing to the summer for introduction, saying "we're starting small, with an eye toward producing a bill that can get Democrat votes and actually pass the Senate as well."
Regardless of the political wisdom of this approach, there are no guarantees that either credit union or bank lobbies will be content with a "small," less ambitious bill.  Hill sources sympathetic to the credit union cause caution that bank trades have signalled an intent to push items such as Basel III capital reform during markup of any regulatory relief bill, while at the same time vigorously opposing credit union supplemental capital modernizations for credit unions.
And there are signs that community bank lobbyist have been modestly successful so far in pushing an agenda that only benefits banks: in early May they succeeded in passing an amendment to a derivative reform bill that would ease SEC registration requirements for the thrift industry.
At this point Congress is moving cautiously to craft balanced regulatory relief legislation. But it appears possible that more controversial issues will be injected into the process, sparking another round in the credit union vs. bank battle.  If a broader bill begins to take shape, the message for the credit union lobby to the Hill will be simple: either include our key items such as MBLs and supplemental capital, or exclude banker pet provisons. 
John McKechnie is a partner at Total Spectrum Government Affairs, and he has over 25 years of experience in the credit union industry.  Prior to joining Total Spectrum, McKechnie served as the Director of Public and Congressional Affairs for the NCUA and, before that, served as CUNA’s chief federal lobbyist.