Why Lifting $50B Threshold May Not Be Panacea for Regionals
by Rob Blackwell
WASHINGTON — Tough new regulatory requirements for regional banks exceeding $50 billion in assets are costly, but much of that toll would remain even if Congress changed the asset threshold, according to a provocative new paper. The paper by Federal Financial Analytics said the heightened rules could cost a combined $2 billion annually for 20 regional players included in the report. Tougher standards for those institutions could also reduce lending by $14 billion to $20 billion over a five-year period and push more business to the unregulated shadow banking sector, the report said… “Eliminating statutory requirements for many systemic standards would have minimal effect on applicable prudential and resolution standards,” the paper said. “Regional [bank holding companies] are already subject to stringent stress testing, resolution-planning, credit-exposure limits, and risk-management standards. Federal and state regulators also have extensive powers to sanction individual banking organizations without resort to systemic regulation. ” Still, Karen Shaw Petrou, the managing partner of the analytics firm, said that raising the limit — as lawmakers have proposed in regulatory relief packages currently being debated — would clearly have an impact. “It’s a qualitative difference because it would give more flexibility to the agencies,” Petrou said in an interview. “Some of the costs would remain, but there would be fewer arbitrary thresholds imposed without regard to the activities of these BHCs or their size.”