Hensarling Chooses CHOICE; CFTC Moves Forward with Priorities as Nominees Pending Confirmation, Administration Outlines Approach to Correspondent Banking

Hensarling Chooses to Move Forward with CHOICE Act

Last Friday, September 9, House Financial Services Committee Chairman Jeb Hensarling (R-TX) announced his intention to move forward with the Republican plan to replace the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank) and formally introduced the Creating Hope and Opportunity for Investors, Consumers and Entrepreneurs Act (CHOICE Act), which “will end taxpayer-funded bailouts of large financial institutions; relieve banks that elect to be strongly capitalized from growth-strangling regulation that slows the economy and harms consumers; impose tougher penalties on those who commit financial fraud; and demand greater accountability from Washington regulators.”

Among its numerous provisions, the legislation provides an “off-ramp” from the post-Dodd-Frank supervisory regime and Basel III capital and liquidity standards for banking organizations that choose to maintain high levels of capital, retroactively repeals the authority of the Financial Stability Oversight Council (FSOC) to designate firms as systematically important financial institutions (SIFIs), fundamentally reforms the Consumer Financial Protection Bureau (CFPB) and imposes stricter accountability requirements on other financial regulators, and imposes enhanced penalties for financial fraud and self-dealing.

The Financial Services Committee will take its first step to move forward with the CHOICE Act by marking-up the bill on Tuesday, September 13. However, while Chairman Hensarling is focused on advancing his proposal,  any action on the CHOICE Act this year is mostly to set the stage for debate in 2017 and beyond. Notably, while Senate Banking Committee Chairman Richard Shelby (R-AL) has also introduced his own financial services reform package, there has been little interest in the Senate in moving forward with his bill, or any other significant legislation for that matter.

Looking ahead, the House is likely to hold one additional “cats and dogs” markup before year’s end, though the timing of such action is unclear. It is expected that Committee members’ priorities that have yet to be addressed this Congress will drive whatever legislation the Committee ultimately decides to take up – if and when it does move forward with such a markup. Separately, the Committee’s Task Force to Investigate Terror Financing is reportedly on track to issue its final report and recommendations on how to comprehensively update the nation’s banking laws to better prevent the financing of terrorism activity in the face of a global and modernized financial system.

This Week’s Hearings:

  • Tuesday, September 13: The House Financial Services Committee will mark-up H.R. 5983, the Financial CHOICE Act.

  • Tuesday, September 13: The Senate Banking, Housing, and Urban Affairs Committee will hold a hearing titled “The National Flood Insurance Program: Reviewing the Recommendations of the Technical Mapping Advisory Council’s 2015 Annual Report.”

  • Thursday, September 15: The Senate Agriculture, Nutrition, and Forestry Committee will hold a hearing to consider the following nominations:

    • Christopher James Brummer, of the District of Columbia, to be a Commissioner of the Commodity Futures Trading Commission; and

    • Brian D. Quintenz, of the District of Columbia, to be a Commissioner of the Commodity Futures Trading Commission

Regulatory Activity

CFTC Approves Cybersecurity and Japanese Collateral Rules as Two Commissioner Nominations Are Set to Move

On Thursday, September 8, the Commodity Futures Trading Commission (CFTC) unanimously voted to adopt cybersecurity regulations for certain derivatives markets (System Safeguards Testing Requirements and System Safeguards Testing Requirements for Derivatives Clearing Organizations). The rules aim to enhance and clarify existing requirements relating to companies’ cybersecurity testing and safeguards. Additionally, by a 2-1 vote, the CFTC affirmed that Japanese collateral rules for companies’ derivative swaps are comparable to what the U.S. adopted earlier this year.

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