SIFI Changes in Senate Bill - Gabelli research Analyst Steven Comery (3-14-2018)

SIFI Changes in Senate Bill - Gabelli research Analyst Steven Comery (3-14-2018)

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Under current Dodd Frank provisions, banks with over $50 billion in assets are deemed “systemically important financial institutions” or “SIFIs”. These companies are subject to the Federal Reserve’s Comprehensive Capital Analysis and Review process, also known as “CCAR”, which is an annual quantitative evaluation of each bank’s capital levels, including planned dividends and repurchases. SIFI institutions must also create and maintain a “living will” to explicate the process for dissolving the bank in a potential insolvency scenario.

The proposed Economic Growth, Regulatory Relief, and Consumer Protection Act currently being debated in the US Senate would raise the SIFI threshold fivefold, from $50 billion in assets to $250 billion, freeing thirteen banks from the heightened level of scrutiny.

The changes would be introduced in a two-step process, with banks between $50 and $100 billion in assets becoming exempt first, with their larger peers following eighteen months later unless they receive special dispensation from the Fed to do so sooner.

With the potential removal of a step change in regulation at $50 billion in assets, we think these changes could make banks below that threshold more interested in mergers and acquisitions, as potential scale would no longer be encumbered by regulatory scrutiny and its associated expenses.

Source: Gabelli TV (via YouTube)
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