- Regional bank stocks are jumping ahead of a Senate vote on whether to roll back some important elements of the Dodd-Frank Act.
- The rollback would expand the number of regional banks that won’t be subject to stringent Dodd-Frank Regulation.
- Watch the Spider S&P Regional Banking ETF trade in real time here.
Regional bank stocks are jumping hours ahead of a Senate vote on whether or not to roll back some key pieces to the Dodd-Frank Act, a post-financial crisis law that laid out protectionary measures against another crisis. Here’s a look at the scoreboard:
- Spider S&P Regional Banking ETF +1.22%
- PNC Bank +1.5%.
- SunTrust Bank +1.8%
- Fifth Third Bank +3.6%
The rollback is widely expected to pass, as not only do Republicans have the majority of Senate seats, but some Democrats are in support of the roll back.
A key reason regional banks are expected to benefit from a “yes” vote is because the bill would expand the number of those not subject to stringent Dodd-Frank regulation.
One core part of the bill would increase the amount in assets a bank needs to hold in order to be considered a Systemically Important Financial Institution, or a SIFI. Currently, any bank that holds $US50 billion in assets is a SIFI. This bill would say a bank needs to hold $US100 billion in assets to become one.
SIFI’s are subject to a rule in Dodd-Frank that requires a bank to undergo preventative Federal Reserve stress tests, which measures a bank’s ability to withstand a crisis.
Non-SIFI banks can make more loans, and more loans means more profits. Investors seem to be pricing in a “yes” vote, sending regional bank stocks upward.
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