With Congress largely focused on passing an infrastructure overhaul, banking policy is not high on lawmakers' agenda. But the industry will still be pushing a number of legislative priorities between now and the end of the year.
Congress usually returns to full session in the fall facing a year-end deadline to advance whatever it can to the president's desk. The House returned from recess this week and the Senate will come back Sept. 13.
Banking legislation has been largely out of the spotlight, but industry lobbyists are still focused on key initiatives. They include a bill to ease the transition away from the London interbank offered rate, an effort to mitigate a higher corporate tax burden, proposed cybersecurity requirements, provisions to make it easier for banks to serve cannabis businesses, and possible reforms of Small Business Administration lending.
The biggest issue on bankers’ legislative wish lists is for Congress to pass a bill to ease the transition away from Libor, the decades-old benchmark that ends in 2023. Libor is embedded in over $220 trillion in legacy contracts for everything from mortgages to consumer loans, and business loans to bonds.
“Libor is probably our number one issue that has a good chance to become law,” said Ed Hill, senior vice president and head of government affairs at the Bank Policy Institute.
The House Financial Services Committee
Federal Reserve Chair Jerome Powell and Treasury Secretary Janet Yellen
If the bill is not enacted this year, observers are hopeful it will make it to President Biden's desk next year.
“There's a significant chance it will become law in 2022 [because] the market has to get some clarity,” said Hill.
The congressional reconciliation package includes some changes related to the corporate tax rate that bank policy experts are also watching closely.
Banks were among the largest
The industry was widely
"Banks were the primary beneficiaries of the lowered corporate tax rate, so the potential for a rate increase matters broadly," Boltansky said.
Bankers also are closely watching the budget resolution that proposes a
Efforts to expand the
Meanwhile, as lawmakers are expected to hold hearings this fall on further streamlining the forgiveness process for Paycheck Protection Program loans, Congress also appears poised to take up SBA modernization.
Sens. Tim Scott, R-S.C., and John Hickenlooper, D-Colo., have introduced legislation that would eliminate decades-old restrictions on nonbank lenders participating in regular SBA programs. That potentially opens the door for a number of fintech lenders, many of which participated in the PPP.
As a result of an existing moratorium, the number of nondepository lenders authorized to participate in SBA's flagship 7(a) program is limited to just 14 lenders. The Scott-Hickenlooper bill — the Expanding Access to Credit for Small Businesses Act — would repeal that threshold, paving the way for more fintech participation.
The bill grew out of a realization that fintechs played a critical supporting role in ensuring PPP funding was equitably distributed, said Ryan Metcalf, head of public policy and social impact at Funding Circle, a Denver-based SBA fintech lender.
SBA Administrator Isabella Casillas Guzman said at her confirmation hearing in February that the Biden administration might back a more inclusionary approach for fintech at the SBA.
"We have the new administrator saying she believes fintech and community development financial institutions provide a crucial vehicle for distribution of capital and that she wanted to keep us engaged in SBA programs," Metcalf said.
"PPP exposed where communities really are underserved by traditional institutions, smaller businesses, businesses in low-to-moderate-income areas and minority-owned businesses," Metcalf said.
Bankers also are concerned about new oversight and reporting requirements in
Banks are balking at further oversight by agencies other than prudential regulators. They also want the timeline for reporting cybersecurity incidents to be extended to 72 hours from the bill’s much shorter 24 hours’ notice.
“You don't want people in the heat of the battle trying to worry about getting reports into various regulators particularly if something happens [outside the U.S.], in India or Hong Kong,” said Hill. “There’s a big difference between notifying affected parties that an incident has taken place and publishing a comprehensive and detailed report. Banks are leaders in reporting, regularly collaborate with federal and state officials and already report within 72 hours, so it’s not a concern about reporting but the reporting timeline.”
In a letter to the Senate Intelligence Committee earlier this month, the American Bankers Association, Bank Policy Institute and Consumer Bankers Association said the 24-hour time frame would result in "erroneous" reports.
"The initial stages of an incident response require 'all hands on deck' to focus immediately on understanding the incident and implementing mitigation and response measures," the groups wrote.
Finally, there remains a slim chance for lawmakers to revive legislation helping banks and credit unions serve marijuana businesses in states where the substance is legal.
Earlier this summer, Senate Democrats abandoned targeted legislation that would allow banks to serve marijuana businesses. Instead, Senate Majority Leader Chuck Schumer, D-N.Y., Sen. Ron Wyden, D-Ore., and Sen. Corey Booker, D-N.J., favor sweeping decriminalization of marijuana use at the federal level that is unlikely to get Republican support.
The more targeted
"My sense is that there will be an effort made to try to enact legislation that Schumer, Wyden and Booker are promoting, which would be more of a comprehensive approach," said Dan Stipano, a partner at Davis Polk & Wardwell. "They're trying to thread a very narrow needle here, and if it doesn't happen, there's a chance that you could see the Safe Banking Act or one of the other bills get enacted. But realistically, we're in late August and quickly running out of days to get any legislation passed."
