US Fed plans to raise bank oversight thresholds, sources say
XLF•The Federal Reserve is working on a plan to raise asset thresholds that trigger stricter bank oversight, with a proposal expected later this year, sources said. Reindexing could lift the highest threshold from $700 billion to around $960 billion and some requirements’ lower threshold toward $150 billion.
1. Possible threshold changes
The Federal Reserve is working on a plan to raise asset thresholds that trigger stricter oversight, potentially allowing some lenders to avoid additional regulation and encouraging consolidation, four people familiar with the matter said. Three sources expect the Fed to propose reindexing the thresholds later this year to account for inflation and economic growth.
2. Banks that could benefit
Current thresholds are $100 billion, $250 billion and $700 billion in assets. The Fed is planning to move the highest threshold closer to $1 trillion and some requirements triggered at the lower threshold closer to $150 billion, sources said. U.S. Bancorp, Capital One, PNC Financial and Truist are closest to the $700 billion threshold; Western Alliance and Zions could grow beyond $100 billion without all current requirements, while Pinnacle Financial Partners and one or two other lenders between $100 billion and $150 billion could shed some requirements.
3. Potential for more deals
The changes could spur consolidation among mid-size lenders that have held off on deals for fear of crossing thresholds, sources said. Banks with $50 billion to $700 billion of assets announced 33 bank and thrift acquisitions over the past decade, including seven last year. The Fed has broad discretion over some requirements, but the law mandates certain rules, including stress tests for banks in the $100 billion category and enhanced prudential standards above $250 billion.
