Could this be the Year the Pendulum Starts to Swing Back?

One might think that this issue of excessive burden of regulatory requirements is a relatively recent phenomenon, a result of the blooming of regulations that has been the product of DFA, Volcker, Sarbanes-Oxley, etc. That would be incorrect. In fact, even as long ago as 2005, PriceWaterhouseCoopers produced the results of a survey that indicated banks around the country and even in the UK were concerned about regulatory impact on their resources, and a resulting reduction in risk diversification, exactly the opposite result most regulators are hoping to accomplish. Even at that point, FDIC VC John Reich had indicated that the agencies had produced over 800 regulations in the prior 15 years, and he felt that compliance with that amount of rule change was having a significant impact on the viability of community banks.1 By comparison, DFA has already produced over 400 new rules and it is only 50% complete.
 

Low and behold, on December 10th, during its last week of work for the year, Congress was presented with an opportunity to act in the form of legislation. The House was presented with a Terrorism Risk Insurance Act renewal bill which included an improvement in the clearing of swaps, and the Senate version of the same bill also had a provision that at least one seat on the Federal Reserve Board be filled with a member who has community banking experience. And then, even better news on December 11th, when both houses passed a bill which raised the threshold for a small bank holding company from $500M to $1B, as recommended by Tarullo and Curry, and it was sent to President Obama for his signature.

And then it happened. Actual legislation that improved banking regulations was part of the massive budget bill signed by Obama on December 16, 2014. It was the last act of the current seated government, where Democrats controlled the Senate and Republicans controlled the House. Many have laid the blame for these past years of legislative stalemate on this power split, but in January 2015 that excuse goes away, as newly elected officials will have Republican control of both, so not so easy to point fingers. Let us hope that the momentum of the past few months doesn't falter as this power shift occurs, but that the advocates maintain their eagerness to make improvements so long awaited by the industry. And with any luck, that pendulum will begin to swing back the other way, and bring relief to the industry in 2015 and beyond.

Footnotes: 

5 http://www.americanbanker.com/news/law-regulation/six-banker-ideas-to-help-relieve-the-crushing-compliance-burden-1071492-1.html