WASHINGTON–While credit unions cite regulatory relief in their push to get S 2155 passed by Congress, many banks have another reason for supporting the legislation–actually, more than 50 billion reasons.
According to one analysis, if S 2155 is passed and provisions of the Dodd-Frank Act are enacted, regional banks could be able to reward shareholders with as much as $53 billion as a result. The reason is the bill includes language that would shield large regional banks from portions of Dodd-Frank that requires them to sit on extra cash to weather the next financial downturn, according to an analysis by S&P Global Market Intelligence.
The freed-up cash will enable those banks to pay fatter dividends and buy back shares.
S&P Global Market Intelligence reported that if “they aggressively returned money,” banks that include BB&T, Citizens Financial, SunTrust Banks, and Fifth Third Bancorp could reward investors with between $3.7 billion and $4.8 billion apiece.
Dodd-Frank requires most banks to sit on additional cash in the event of another recession, which would lead to losses on mortgages and other loans. According to the analysis, the nation’s biggest banks, such as JPMorgan Chase and Wells Fargo, would not see much help from this particular change in Dodd-Frank, which raises to $250 billion in assets from $50 billion in assets the threshold for a bank to be considered “too big to fail.”
In its analysis, the Wall Street Journal noted, “But supporters of Dodd-Frank say that relaxing regulations on these large regional players could be unwise…It's also worth noting that the banking industry is thriving, despite claims of excess regulation. Excluding a one-time hit from the tax law, banks hauled in an all-time high of $183 billion of profit last year. Banks even had enough cash left over to pay a record $121 billion in dividends.”
As CUToday.info has reported, a number of credit union leagues across the country have been joining with banker associations in their states to lobby for passage of the legislation, which is now back before the House for reconciliation after having passed both the House and Senate.