As of the end of August 2018, two key provisions of The Economic Growth, Regulatory Relief, and Consumer Protection Act (aka the Crapo bill, S.2155, or increasingly, EGRRCPA) have become effective: the increase in the small bank holding company policy statement threshold and the increase in the expanded examination cycle threshold. Before looking at those provisions, I have to acknowledge the fabulous Wall Street Journal story by Ryan Tracy, “Can You Say EGRRCPA? Tongue-Twister Banking Law Confuses Washington.” Personally, I’m now leaning towards “egg-rah-sip-uh.”
On July 6, 2018, the federal banking agencies released an Interagency statement regarding the impact of the Economic Growth, Regulatory Relief, and Consumer Protection Act that provided guidance as to which provisions were immediately effective versus which provisions would require further regulatory action. Included in this guidance was confirmation that the banking regulators would immediately implement EGRRCPA’s changes to the Volcker Rule, freeing most institutions with total assets of less than $10 billion from the constraints of the Volcker Rule. The regulators noted that they “will not enforce the final rule implementing section 13 of the BHC Act in a manner inconsistent with the amendments made by EGRRCPA to section 13 of the BHC Act.”
Unfortunately, two of the more significant areas of regulatory relief for community banks, the respective increases in thresholds for the small bank holding company policy statement and the expanded examination cycle were not granted such immediate effectiveness. While EGRRCPA required the Federal Reserve to act on the expansion of the policy statement within 180 days, anyone familiar with the deadlines set forth in the Dodd-Frank Act for regulatory action would not be holding their breath.
Small Bank Holding Company Policy Statement Expansion. On August 30, 2018, the Federal Reserve published an interim final rule implementing the revisions to the small bank holding company policy statement. The Federal Reserve’s small bank holding company policy statement generally exempts such institutions from the requirement to maintain consolidated regulatory capital ratios; instead, regulatory capital ratios only apply at the subsidiary bank level. The small bank holding company policy statement was first implemented in 1980, with a $150 million asset threshold. In 2006, it was increased to $500 million, and in 2015, it was increased to $1 billion. Section 207 of EGRRCPA called for the Federal Reserve to increase the threshold to $3 billion, and the interim final rule implements this change.