Industry Watch The Impact of Regulatory Relief

January 2019 | Article

The push for the passage of bill S.2155, the Economic Growth, Regulatory Relief, and Consumer Protection Act, was inspiring—so many in the industry joined together to right the perceived wrongs of the Dodd-Frank Act with the primary focus being the reduction of unnecessary regulatory burden.

As with every bill passed in Washington, there is at least one hidden consequence that ultimately reveals itself at some point after the fact. We anticipate that will be increased merger and acquisition activity for S.2155. Some in the industry will see this consequence as a positive aspect of the bill, while others will see it as a negative, which is simply the result of the democratic workings of our nation.

One could argue the most significant beneficiaries of S.2155 are the regional banking organizations (RBOs), those over $10 billion in assets, and (now) under $100 billion. Even those under, but close to, the $10 billion mark are likely major beneficiaries. Given the laxing of Dodd-Frank stress-testing requirements among other key S.2155 provisions, expansion through not only the traditional organic growth but also M&A activity is more appetizing. The intimidation factor of increased supervisory scrutiny for RBOs has diminished. If we are to see increased consolidation activity within the RBO segment, where does that leave the industry as a whole? Will we see an increased number of RBOs or larger RBOs? And what about the future for the community banking organizations?

Anyone tenured in the banking industry knows there are countless factors considered when making the decision to buy or sell a bank. The amount of regulatory burden is only one of them. Nevertheless, S.2155 opened doors for increased consolidation in the industry. Only time will tell how all this shakes out, and how the everyday consumer, as well as the industry, are ultimately impacted by S.2155.

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