Congress Passes Bank Deregulation Bill to Roll Back Dodd-Frank

Wall Street will soon be getting some regulatory relief.

The House of Representatives on Tuesday passed a bank deregulation bill that will roll back parts of the Dodd-Frank Wall Street Reform and Consumer Protection Act, sweeping regulation enacted in 2010 to prevent a repeat of 2008 financial crisis. The legislation, passed in March by the Senate, will now move to the desk of President Donald Trump to sign.

The Volcker rule, which prohibits banks from making speculative bets with their own money, is one area of the Dodd-Frank Act that has been a regulatory burden to Wall Street. While the ban on proprietary trading will remain in place for big banks, there will be less red tape from a compliance perspective.

“It’s not a radical rollback,” Mark Nuccio, investment management partner at law firm Ropes & Gray, said by phone. “What they’re trying to do is get back to a more normal bank examination process.”

[II Deep Dive: Trump Setting Stage to Roll Back Fiduciary Rule, Dodd Frank]  

While the Economic Growth, Regulatory Relief, and Consumer Protection Act would free smaller banks with less than $10 billion of assets from the Volcker rule, they weren’t the ones typically engaging in the types of activities the regulation sought to prohibit after the crisis, according to Nuccio. But the bill is still a win for big banks as it makes record-keeping for the rule less arduous from a regulatory point of view.

“The Volcker rule is very difficult to comply with,” Nuccio said. “It’s like trying to drive down the highway with a state policeman in the backseat.” 

Under the Trump administration, the rollback of post-crisis regulation will likely continue after the bill becomes law. 

Nuccio said he expects that financial regulators will soon propose “Volcker 2.0,” making more significant revisions to the rule that could benefit the biggest banks on Wall Street.