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What Does Regulatory Reform Really Mean?

Ninth District Highlights - October 2018

October 15, 2018


Christine Gaffney Senior Vice President, Supervision, Regulation, and Credit
What Does Regulatory Reform Really Mean?
Christine Gaffney

As those in the industry (and elsewhere) are well aware, the Economic Growth, Regulatory Relief, and Consumer Protection Act (EGRRCPA), otherwise known as the Crapo bill,1 became law on May 24, 2018. Since then, there has been much debate about whether EGRRCPA goes too far, does not go far enough, or is somewhere in between as it relates to regulatory relief. At a high level, EGRRCPA’s most significant provisions related to banking supervision and regulation include:

  • Raising thresholds for the application of enhanced prudential standards for large banking organizations,
  • Providing regulatory burden relief for depository institutions and small depository institution holding companies, and
  • Changing some elements of capital and liquidity requirements.

People with varying views on the law have been asking us about the anticipated impact of its implementation. This article highlights key requirements for your consideration.

Implementation of EGRRCPA

It is important to note that while the Crapo bill came into effect on May 24, the Federal Reserve was not able to implement most of its provisions right away because related regulations need to be revised.

Some of these revisions require interagency coordination. The Board of Governors described the immediate effects of the statute in statements released on July 6, 2018.2 Both of the statements released are considered interim until the regulatory agencies work through the implementation phase to ensure that the rules conform to the law. The statements highlight effects of the legislation, including perhaps the most commonly cited: elimination of the requirement for company-run stress tests for bank holding companies, foreign banking organizations, savings and loan holding companies, and depository institutions with $100 billion or less in total consolidated assets.

For our community banking institutions, one of the most notable changes raises the asset threshold for banks to qualify for an 18-month examination cycle to $3 billion.

Safety and soundness changes

For our community banking institutions, one of the most notable changes raises the asset threshold for banks to qualify for an 18-month examination cycle to $3 billion (currently the threshold is $1 billion). This change will take place through rule-making. Other changes include allowing banks with less than $5 billion in assets (the current threshold is $1 billion) to file short-form Call Reports during the first and third quarters and exempting certain reciprocal deposits from the Federal Deposit Insurance Corporation’s restrictions on accepting brokered deposits.

Consumer compliance changes

While most changes discussed in the press tend to focus on safety and soundness supervision, there are also changes to consumer compliance supervision that may not be as well known. As with other changes, rules may need to be rewritten prior to implementation. An example of a consumer compliance change is that small-volume loan originators (less than 500 mortgages or less than 500 open-end lines of credit for each of the two preceding years) are exempt from new Home Mortgage Disclosure Act disclosures added by the Dodd-Frank Act if they have an acceptable Community Reinvestment Act rating. The number of depository institutions that will qualify for this exemption is expected to be substantial. Other changes include providing an exemption from appraisal requirements for certain rural real estate transactions.

Consumer protection changes

Recognizing the importance of reducing the risk of identity theft, the Crapo bill makes several important changes to address consumer protection. More specifically, the law allows consumers to freeze and unfreeze their credit report without charge for all three major credit bureaus and allows enhanced protection of consumer credit information in the event of a data breach or identity theft. The law also includes a variety of changes to enhance protections for veterans and students.

Next steps

Even though the Crapo bill has been signed into law, its implementation is quite complex. This article contains only high-level information on changes that have occurred or are under way. Our state member banks should contact their relationship manager with specific questions about the implementation of this law. This Federal Reserve Bank’s outreach efforts will include clarification and communication of applicable changes as implementation moves forward.


1 The bill is nicknamed after Sen. Mike Crapo (R-ID), who is chairman of the Senate Banking Committee and sponsored the bill.

2 Federal Reserve Board issues statement describing how, consistent with recently enacted EGRRCPA, the Board will no longer subject primarily smaller, less complex banking organizations to certain Board regulations

Interagency statement regarding the impact of the Economic Growth, Regulatory Relief, and Consumer Protection Act (EGRRCPA)

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