By: Barry Wides, CPA

For the past several months, housing/banking reform legislation has been working its way through Congress and is now near bipartisan enactment. On May 20th, the House passed the 21st Century ROAD to Housing Act text that reflects an agreement with the Administration. Senate action, hopefully, will soon follow. This legislation cuts red tape to make it easier to build a home, allows community banks to more freely deploy funding, and prohibits large institutional investors from buying single-family homes that could otherwise be purchased by families. Below is a list of provisions of particular interest to banks and credit unions: 

• Allows the OCC and FRB to increase from 15% to 20%, the aggregate amount of investments that a national banking association and a state member bank may make to promote the public welfare.
• Establishes that custodial deposits of a well-capitalized insured depository institution with strong supervisory ratings are not considered to be brokered deposits if the total amount does not exceed 20% of an institution’s total liabilities and the institution has less than $10 billion in assets.
• Modifies the amount of reciprocal deposits of a well-capitalized insured depository institution with strong supervisory ratings that are not considered to be brokered deposits under a graduated scale based on an institution’s total liabilities.
• Raises the consolidated asset threshold from $3 billion to $6 billion for insured depository institutions to qualify for an 18-month examination cycle.
• Amends the Federal Credit Union Act to revise the frequency of meetings that a Federal credit union’s board of directors is required to hold.
• Requires the GAO and appropriate Federal banking regulators to issue reports within specified timeframes when the FDIC invokes the systemic risk exception, detailing causes of bank failures, regulatory actions, and any management or supervisory shortcomings.
• Amends the Federal Deposit Insurance Act to modify the least cost resolution mandate to provide the FDIC with the discretion to approve a bid for a failed or failing bank other than the absolute least cost bid, provided certain conditions and guardrails are met.
• Amends the Federal Deposit Insurance Act and the Bank Holding Company Act of 1956 to restrict the circumstances under which a Federal banking agency can waive the 10% concentration limits on deposits and liabilities for banking organizations and financial companies when they acquire failed insured depository institutions.
• Directs the Department of the Treasury to establish a mentor-protégé program pairing large financial institutions with other depository institutions, with the goal of enhancing their capacity to serve customers and potentially act as financial agents.
• Directs Federal banking and credit union regulators to streamline the de novo application process, reduce duplicative information requests, and review capital-raising restrictions, particularly for non-accredited investors.
• Creates a two-year phase-in pilot for de novo financial institutions to meet Federal capital requirements.
• Requires Federal prudential regulators to jointly study ways to improve the growth, capital adequacy, and profitability of rural depository institutions and to identify regulatory barriers to these goals and to the formation of new depository institutions, with a report to Congress due within one year of enactment.
• Amends the Federal Reserve Act to reduce the total amount of discretionary surplus funds that may be held at Federal Reserve banks.
• Prohibits the Federal Reserve from issuing a central bank digital currency until December 31, 2030 and includes a Rule of Construction that clarifies this section does not allow the Federal Reserve to issue a central bank digital currency or any digital asset that is substantially similar to a central bank digital currency directly or indirectly absent authorization by an Act of Congress. 

For questions about these provisions, or how it could affect your institution, please feel free to reach out to Managing Director Barry Wides 

About the author: Mr. Wides is a leader in Artisan Advisors’ risk management practice.  Mr. Wides previously served as Deputy Comptroller for Community Affairs in OCC’s Bank Supervision Policy Department. He can be reached at [email protected].