WASHINGTON — As Congress returns from its August recess, a number of banking issues — ranging from credit card interchange fees to cannabis banking — could get traction before the year is out. But some experts say a busy summer for bank regulators has soured any chance of bipartisan compromise on banking-related bills.
A fight brewing over government spending is expected to take up most of the oxygen on Capitol Hill for at least the next month. For bankers, that means another chance for the
But there are standalone bills that could come up as well: Sen. Chuck Schumer, D-N.Y., the Senate Majority Leader, nodded to cannabis banking in a "Dear Colleague" letter on Friday, as well as bipartisan legislation out of the Senate Banking Committee that would give the Federal Deposit Insurance Corp. more
But on the banking front, experts anticipate a more difficult landscape for that kind of legislation to advance — even just to be attached as a rider to a must-pass bill.
Ed Mills, managing director of Washington policy for Raymond James, said that the Federal Reserve's
"It's a question of how much Basel III endgame rules poisoned the well for other bank regulations on the Hill," he said. "There's a view that Democrats or regulators appointed by Democrats are using the bank panic of March to go further, kind of on a partisan basis, and implement some significant increases to capital. So with that as a backdrop, I think that the ability to compromise on some legislative proposals becomes more difficult."
Specifically on cannabis banking and the RECOUP Act — the two bank-specific issues mentioned in Schumer's letter — the anger over the Basel proposal further lessens the chance that House Republicans will be open to taking up their cause, even with some degree of bipartisan agreement in the Senate.
"I don't think they're dead, but they certainly have a flat tire," said Ed Groshans, a senior policy analyst at Compass Point Research.
Some bank groups also see animosity growing after the Basel III capital rules between President Joe Biden's bank regulators and House Republicans. Bank groups immediately pushed back against the Fed's capital proposal after banking regulators released it in July, saying that it exceeds international standards and would require that strong banks hold more capital than is necessary to be safe and sound.
"House Republicans in particular have a little bit of a bone to pick with the Fed, where they feel like in a number of instances the Fed is going beyond its mandate," said Kirsten Sutton, executive vice president of congressional relations and legislative affairs at the American Bankers Association, in an interview. "But you're seeing interest in regulatory action in the House and the Senate and on both sides of the aisle. The impact would be so sweeping that you are seeing members wanting to get an understanding of what the Fed is proposing and the potential implications not just for banks, but really, and perhaps even more importantly for their customers."
Still, Ian Katz, an analyst with Capital Alpha Partners, said that House Republicans will likely still vocally criticize the capital proposal, as well as a number of proposals from the FDIC last week that would impose stricter long-term debt and living will mandates, as a recurring theme throughout the rest of the year.
"The main thing I'm expecting is a fair amount of Republican pushback to the two recent batch of bank proposals, Basel and last week's long-term debt and resolution-related requirements," he said. "I think there will be criticism of the levels of capital that will be required in Basel, in addition to
