Rewrite of Bank Rules Advances Slowly, Frustrating Republicans

Many efforts to retool postcrisis financial rules remain unfinished; Republicans want faster action

.. Daniel Tarullo, the Fed’s regulatory point-person during the Obama administration, in May said postcrisis rules “could be endangered by a kind of low-intensity deregulation consisting of an accumulation of non-headline-grabbing changes and an opaque relaxation of supervisory rigor.”Under the law passed a year ago, regulators face a fall deadline to simplify rules for midsize and small banks. They also want to make progress by year’s end to retool rules that limit speculative trading by large firms and test the ability of firms such as J.P. Morgan Chase & Co. or Goldman Sachs Group Inc. to continue lending during a severe recession.

Overall, regulators say they are moving as fast as they can on more than 30 changes affecting the financial sector. The proposed changes, they say, would better calibrate postcrisis rules under the 2010 Dodd-Frank financial law without undermining the financial system.

“We’ve been working on a regulatory restructuring that is aggressive in its scope but responsible in its substance,” Federal Reserve Vice Chairman Randal Quarles said.

The pending changes include simplifying annual stress tests and eliminating a system of giving pass-or-fail grades to the big banks that take them, both industry victories. Another change would ease a rule that requires big banks to plan annually for their own demise, allowing the largest U.S. firms to produce full so-called living-will plans every four years rather than annually. Regulators also are changing a rule adopted to curb excessive borrowing at eight of the largest U.S. banks.

..  In some cases, regulators’ attempts at changing rules have been derailed by lukewarm support from Wall Street. The effort by Commodity Futures Trading Commission to overhaul postcrisis derivatives rules has stalled largely because major banks and trading firms have become accustomed to current rules and aren’t eager to change their business models.

Similarly, banks objected to a plank in the rewrite to the Volcker rule, the prohibition on lenders making risky “proprietary” bets. The pushback has led regulators to consider proposing a revised version, according to people familiar with the process.

Trump-appointed officials are also spending some of their time finishing rules mandated by the Dodd-Frank law that weren’t completed during the Obama administration. That means advancing restrictions in a more industry-friendly way than if Democratic appointees still held the rule-writing pen.

The Securities and Exchange Commission last week finished work on a rule raising standards for investment advice by stockbrokers. A federal court had voided a tougher version by the Obama administration that applied to retirement-savings advice. Trump appointees at the Consumer Financial Protection Bureau also rewrote an Obama-era rule for payday loans, removing a requirement that would have made it difficult for companies to offer high-cost consumer loans.