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Sullivan & Cromwell discusses Senate Regulatory Relief Proposal: Banking Committee Chairman Releases Discussion Draft of “The Financial Regulatory Improvement Act of 2015”

Yesterday afternoon, Senate Banking Committee Chairman Richard Shelby (R-AL) released a discussion draft of “The Financial Regulatory Improvement Act of 2015” (the “Discussion Draft”). This proposed legislation would significantly amend certain aspects of the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank”), in particular the current regulatory framework for designating and regulating so-called systemically-important financial institutions, or “SIFIs.” In addition, the 216-page Discussion Draft would substantially broaden the Dodd-Frank safe harbor for “qualified mortgages” and includes a number of other notable provisions relating to the regulation of insurance companies, the structure and operation of the Federal Reserve System, and housing finance, among other matters.

In a statement accompanying the release of the Discussion Draft, Chairman Shelby described it as a “working document intended to initiate a conversation with all members of the Committee who are interested in reaching a bipartisan agreement to improve access to credit and to reduce the level of risk in [the] financial system.” The Committee’s Ranking Minority Member, Sen. Sherrod Brown (D-OH), issued a statement maintaining that, “[r]ather than focusing on issues that enjoy bipartisan support,” the Discussion Draft is a “sprawling industry wish list of Dodd-Frank rollbacks,” but he pledged to “work with Republicans . . . to provide small financial institutions the help they need without undermining important financial safeguards.” Similarly, the Treasury Department commented that the Discussion Draft “appears to roll back and undermine significant portions of Wall Street reform,” but stated that Treasury “stand[s] ready to work with the Committee on targeted efforts that would strengthen reforms, building on the tiered and tailored regulatory framework established by [Dodd-Frank].” The Committee is scheduled to hold a mark-up of the legislation on May 21, 2015.


This memorandum is based on our preliminary review of the legislative text and the accompanying section-by-section summary, also released yesterday by Chairman Shelby’s staff. Key provisions of the Discussion Draft include:


As noted above, the Senate Banking Committee is expected to consider this legislation at a mark-up scheduled for May 21, although modifications are likely to be made to the Discussion Draft prior to the mark-up and/or during the Committee amendment process. We will continue to monitor this situation and provide additional information and analysis, as appropriate.


[1]     The Sec. 165-mandated enhanced prudential standards include risk-based capital requirements and leverage limits, liquidity requirements, overall risk management requirements, supervisory stress-testing, resolution planning and credit exposure reporting, and concentration/credit exposure limits. Enhanced Prudential Standards for Bank Holding Companies and Foreign Banking Organizations, 79 Fed. Reg. 17240 (Mar. 27, 2014), available at See our Client Memorandum, “Enhanced Prudential Standards” for Large U.S. Bank Holding Companies and Foreign Banking Organizations, dated Feb. 24, 2014, available at

[2]    The Basel Committee on Banking Supervision, in its international framework for identifying global systemically-important banks, or “G-SIBs,” that are subject to a G-SIB capital surcharge, and the Federal Reserve, in its proposed rules to implement the G-SIB surcharge, apply these same criteria for identifying banking organizations as G-SIBs subject to the surcharge. See Basel Committee on Banking Supervision, Global systemically important banks: updated assessment methodology and the higher loss absorbency requirement, dated July 2013, available at and Risk-Based Capital Guidelines: Implementation of Capital Requirements for Global Systemically Important Bank Holding Companies, 79 Fed. Reg. 75473 (Dec. 18, 2014), available at

[3]    The Discussion Draft would raise the threshold for DFAST applicability from $10 billion to $50 billion in total consolidated assets.

The full and original memorandum was published by Sullivan & Cromwell on May 13, 2015 and is available here.

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