The Congressional Research Service ("CRS") reviewed recent proposals by the Federal Reserve Board ("FRB") to reduce capital requirements and other Enhanced Prudential Regulation ("EPR") requirements for banks with over $50 billion in assets.
CRS highlighted the following FRB proposals:
- the Economic Growth, Regulatory Relief and Consumer Protection Act (P.L. 115-174), which was intended to create a tiered and better-tailored EPR regime for banks by raising the asset threshold to $100 billion;
- reducing the capital that global systemically important banks are required to hold against the supplementary leverage ratio; and
- combining stress test capital planning with the overall capital requirements for large banks.
According to CRS, banking regulators generally support the proposals, and opponents are concerned that the systemic and prudential risks outweigh the reduced regulatory burden and resulting economic benefits.
CRS stated that comparing the costs and benefits of EPR, and tailoring or removing certain banks from it, depends on which banks are "too big to fail," which cannot be determined until a bank fails. No large bank has failed since the 2008 financial crisis, CRS said.
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