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Regulators, Lawmakers Push Proposals to Loosen Banking Oversight

The U.S. Treasury issued a report recommending changes to FSOC’s process of determining government supervision status and enhanced prudential standards for nonbank financial companies. The report generally calls for an overhaul of the process for designating nonbank financial institutions as systemically important. The Wall Street Journal reports that observers say the recommendations would make it less likely that FSOC would designate nonbank firms as systemically important. Prudential is the only nonbank firm that currently retains the SIFI label.  Meanwhile, a bipartisan U.S. Senate agreement may provide oversight relief to small and large banking organizations. The proposal would reduce the number of banks subject to oversight by the Federal Reserve by generally raising the threshold for applying enhanced prudential standards from $50 billion to $250 billion in assets along with easing stress testing and other requirements. Bank holding companies with total consolidated assets between $50 billion and $100 billion would be immediately exempt from enhanced prudential standards after the effective date. The proposal also contains relief regarding certain capital holding requirements for custodial banks such as State Street and BNY Mellon. A Wall Street Journal report said that because of strong bipartisan report, the bill is likely to make it to the President’s desk.