Two weeks ago, the banking regulators, led by the Federal Reserve, issued a proposed rule that would substantially weaken certain safeguards put in place following the 2007-8 financial crisis for many of the largest banks in the country. The class of U.S. banks impacted by the various regulatory rollbacks included in the rule—those with between $100 billion and $700 billion in assets—collectively hold almost $3 trillion in assets and received nearly $60 billion in Troubled Asset Relief Program bailout funds during the last crisis. Some elements of the proposal implement provisions of S 2155, the financial deregulation bill signed into law by President Trump earlier this year, while others go even further. These changes to stress testing, capital requirements and liquidity rules would reduce the banking sector’s ability to withstand bouts of stress in the financial system, elevate the possibility of debilitating bank runs and increase the chances of another financial meltdown. This rule joins a steady stream of proposed rollbacks that, when considered together, would meaningfully erode the post-crisis regulatory framework.
The above excerpt was originally published in American Banker.
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