The Alleviating Stress Test Burdens to Help Investors Act was passed by the House with a 395-19 majority. The passing of this bill by the house is expected to pave the way for exempting nonbank financial institutions that are regulated by the SEC [1] or U.S. Commodity Futures Trading Commission [2] from the Dodd-Frank Act’s stress testing requirements. The rule, however, does not apply to institutions that are under supervision by the Federal Reserve [3].
Introduced by Representative Bruce Poliquin (R-ME), the bill (H.R. 4566 [4]) aims to amend the bank-centric capital-based stress testing requirements for nonbanks, such as mutual funds.
“The ‘stress-test’ regulation is a well-intentioned idea, but it must be applied in the right way for each institution and not in a ‘one-size-fits-all’ approach so that it can work as it was originally envisioned. My bill is an important and bipartisan fix that will make sure our regulations are applied properly and fairly,” Poliquin said after the bill passed the house.
“Applying a one-size-fits-all regulatory structure – in this case, a bank-centric model – is not only bad for the asset management industry but far more importantly, for our constituents that they serve who choose to save and invest,” said Jeb Hensarling, Chairman of the House Financial Services Committee that led the passage of this bill.
The bill affects the mutual funds industry, which is one of the investment channels used by consumers to save for a new home, retirement, or education. In a statement, the House Financial Committee pointed out that these savers and investors would also be protected by this bipartisan bill that exempts nonbank financial institutions that are not under supervision by the Federal Reserve.
“This approach is common sense: It is not one-size fits all; it recognizes that the primary regulator of nonbank financial companies is better-suited than a bank regulator to determine whether a stress test might be useful to address risks; and it recognizes that as a general matter, stress testing asset managers is difficult and often needless,” Hensarling said.