Senate Banking Head Mulling Fed Overhaul Bill (May 11, 2015)
The head of the Senate Banking Committee reportedly is readying a bill that would restructure the Federal Reserve and lead to fewer midsize banks being deemed “too big to fail.” Sen. Richard Shelby (R-Ala.) is finalizing a draft of the legislation, which will be distributed to the Senate Banking Committee today, according to reports. The bill would establish a Congressional committee to recommend changes to the Fed—which would be required to implement the committee’s recommendations unless the rest of Congress issues a resolution disapproving the changes. The draft also includes a provision that would make the role of New York Fed president subject to Senate confirmation.
One of the bill’s key provisions would raise the bar for banks to be considered systemically important by the Financial Stability Oversight Council—and thus subject to increased capital requirements and regulatory supervision. Shelby’s plan would increase the threshold for being systemically important to banks with $500 billion or more in assets, up from its current level of $50 billion. A number of banks, such as U.S. Bank, SunTrust and PNC, among others, no longer would be considered systemically important
Shelby pushed the original May 14 committee meeting to consider the bill to May 21, after Democratic committee members said in a letter they hadn’t been given sufficient time to analyze and review the proposal and would “be united in opposition” to the package if Senate Republicans went forward as planned.
“In light of these recent developments, it is very unclear where the bill is headed,” says Alan Kaplinsky, a partner at Ballard Spahr LLP. Aside from reclassifying some prepaid issuers as no longer “too big to fail,” the legislation likely would have limited effect on the prepaid card industry, specifically, Kaplinsky tells Paybefore.
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