Limiting the frequency of “stress tests” that measure the ability of banks to withstand economic challenges, and restraining the scope of regulation over non-bank banks, were the focus of two bills passed by the House Wednesday.
Under H.R. 4293, the Stress Test Improvement Act of 2017 (sponsored by Rep. Lee Zeldin, R-N.Y.), certain bank holding companies would be required to conduct company-run stress tests once a year rather than semiannually. The bill also obliges the Federal Reserve to issue regulations that outline economic conditions and methodologies for conducting stress tests; and to assess the effect of the agency’s stress-testing models and methodologies on financial stability, credit availability, model risks, and investment cycles.
The legislation also requires the Fed to issue additional regulations limiting its Comprehensive Capital Analysis and Review (CCAR) program. H.R. 4293 blocks the Fed from: subjecting a bank holding company to its CCAR program more than once every two years and objecting to a bank holding company’s capital plan based on qualitative deficiencies. The bill also directs the central bank to establish procedures to respond to inquiries from bank holding companies subject to the CCAR program.
The other bill, affecting regulation of non-bank banks, would require the Financial Stability Oversight Council (FSOC) to “evaluate the need to subject nonbanks to heightened prudential standards by the Federal Reserve and reevaluate annually and periodically, in coordination with the designated company and the appropriate prudential or market regulator, whether designated companies still pose a systemic risk to the financial system,” according to the committee report.
H.R. 4061, the Financial Stability Oversight Council Improvement Act of 2017 (sponsored by Rep. Dennis Ross (R-Fla.)), would also require the FSOC, when identifying a non-bank financial company as a potential threat to the nation’s financial stability, to provide that company with a written notice explaining “with specificity” the basis for the designation and would require a copy of the notice to be provided to the company’s primary financial regulatory agency.