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Luetkemeyer Introduces Legislation Promoting Risk-Based Regulation for Banks

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Washington, August 5, 2013 | comments
U.S. Rep. Blaine Luetkemeyer (MO-3) this week introduced the Systemic Risk Designation Improvement Act that would more closely base the regulation of financial institutions on risk rather than on arbitrary asset size.
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U.S. Rep. Blaine Luetkemeyer (MO-3) this week introduced the Systemic Risk Designation Improvement Act that would more closely base the regulation of financial institutions on risk rather than on arbitrary asset size.

“After many years in the banking and insurance businesses, I understand the importance of creating banking standards that appropriately account for risk and the varying structures of small, mid-size and large financial institutions,” Luetkemeyer said. “Only in Washington, DC could a regulatory system be created which treats interconnected, global institutions with complex lines of business the same as institutions focused on traditional, retail and commercial banking.”

The Systemic Risk Designation Improvement Act would enhance the criteria used to make Systemically Important Financial Institution, or SIFI, designations to ensure that those with the SIFI designation, and therefore subject to stricter regulatory standards, are those institutions that are not only large in size, but also globally interconnected and complex. In turn, the legislation would help to free traditional retail and commercial banks so that they are able to focus on making loans to customers, enhancing our recovery. The Dodd- Frank Act used a numeric threshold of $50 billion to subject all institutions, regardless of business lines or complexity, to enhanced regulatory assessment through the SIFI designation. Dodd-Frank does not consider the fact that community banks, mid-size banks and large banks often have completely different business models, resulting in regulatory scrutiny of companies based on size rather than activity.

Ultimately, the legislation would support economic growth by allowing community and regional banks to lend without being burdened by the required regulation of reaching the $50 billion threshold.

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