A Senate proposal to raise the level at which banks are deemed systemically important could help free up as much as $66 billion in capital at 11 lenders and allow for increased shareholder payouts, Bloomberg reported today. If lawmakers approve the most extensive rewrite of the Dodd-Frank Act, it would remove an obstacle to returning capital for firms such as American Express Co., which has the largest percentage buffer over required minimums, and Capital One Financial Corp., which would have the most additional capital on a dollar basis. The Senate Banking Committee is scheduled Thursday to debate a bill that would exclude banks with less than $500 billion of assets from being automatically designated as systemically important financial institutions. If the measure becomes law and the Federal Reserve adopts similar limits in its annual stress test, regional and specialty-finance lenders could be freed from some of the toughest and most costly regulatory burdens. Thirty-one banks, including foreign firms with U.S. units, are currently designated as systemically important and must undergo stress tests measuring their capacity to withstand economic shocks. The Fed subjects those same firms to a second round of tests — not required by Dodd-Frank — that assess their ability to boost shareholder payouts and have resulted in them holding additional capital on top of minimums set by international regulators. The biggest 11 would have $66 billion in capital above their required minimums, which is based on the companies’ first-quarter regulatory filings.
