Legislative Activity

House Financial Services Committee Sets Agenda for the Year Ahead As Senate Banking Committee Largely Silent

Following the recent House Financial Services Committee retreat, we expect financial services lawmakers – at least in the House – to begin moving forward with their 2016 policy agenda. Among their priorities for this year (many of which are priorities from last year that were not finalized): (1) limiting the Financial Stability Oversight Council’s (FSOC) authority to designate financial institutions as systemically important; (2) repealing the Volcker Rule, which placed limits on the types of investments banks can make; (3) changing the Consumer Financial Protection Bureau’s (CFPB) single Director structure to a bipartisan commission that is subject to the appropriations process; and (4) repealing Dodd-Frank’s orderly liquidation authority.  Additionally, there remains a possibility that Chairman Jeb Hensarling (R-TX) may actually introduce a Dodd-Frank alternative, which would, among other things, potentially remove Dodd-Frank requirements for those financial institutions maintaining higher capital levels.

On the Senate Banking Committee, there has been relatively little activity since last fall, as Chairman Richard Shelby (R-AL) remains focused on his reelection bid. Though there is a subcommittee hearing on market structure issues scheduled for next month, there are no plans – at least publicly – to move forward with any financial services reform issues or the myriad of nominees presently pending before the Committee.

Lawmakers Focus on Puerto Rico’s Fiscal Crisis

Following a subcommittee hearing on the matter earlier this month, this week the House Natural Resources Committee will hold a hearing to further examine how to address the debt crisis in Puerto Rico. During the hearing, Mr. Antonio Weiss, Counselor to the Secretary, U.S. Department of the Treasury, will provide lawmakers with the Treasury Department’s analysis of the situation. Concurrently, the House Financial Services Committee will hold a hearing focused on the implications of Puerto Rico’s fiscal woes on the U.S. bond markets. With the Puerto Rican government having already missed a debt payment last month – and more missed payments expected in the coming months – financial services lawmakers will seek to determine the root causes of the crisis, discuss the health of Puerto Rico’s financial services sector, and analyze the impact of the crisis on investors.

Thus far, all indications are that lawmakers will move forward with legislation that creates a financial control board to help Puerto Rico implement significant changes to mitigate the crisis and prevent it from happening again. Though some have discussed the need for extending bankruptcy protections to the Commonwealth, there has been pushback on the idea – at least until certain financial reforms are made. Still, with a little over a month until Speaker of the House Paul Ryan’s (R-WI) self-imposed March 31 deadline by which to address Puerto Rico’s debt crisis, lawmakers will need to come together soon on an approach if they have hopes of finalizing a solution by the end of next month. 

This Week’s Hearings:

• Wednesday, February 24: The House Financial Services Subcommittee on Capital Markets and Government Sponsored Enterprises will hold a hearing titled “The Impact of the Dodd-Frank Act and Basel III on the Fixed Income Market and Securitizations.”

• Thursday, February 25: The House Financial Services Subcommittee on Oversight and Investigations will hold a hearing titled “Puerto Rico’s Debt Crisis and Its Impact on the Bond Markets.”

• Thursday, February 25: The House Financial Services Subcommittee on Housing and Insurance will hold a hearing titled “The Impact of International Regulatory Standards on the Competitiveness of U.S. Insurers: Part II.”

• Thursday, February 25: The House Natural Resources Committee will hold a hearing titled “The U.S. Department of Treasury’s Analysis of the Situation in Puerto Rico.”

• Thursday, February 25: The House Agriculture Subcommittee on Commodity Exchanges, Energy, and Credit will hold a hearing to review the G-20 swap data reporting goals.

Regulatory Activity

CFPB, SEC, OFR All Set to Hold Meetings

On Thursday, February 25, various financial services entities will hold meetings, including:

• The CFPB will hold a meeting of its Consumer Advisory Board to discuss the Bureau’s strategic outlook for 2016-17 and financial well-being.

• The Securities and Exchange Commission (SEC) will hold a meeting Advisory Committee on Small and Emerging Companies to discuss the rules and regulations affecting small and emerging companies under federal securities laws.

• The Office of Financial Research (OFR) will hold the seventh meeting of its Financial Research Advisory Committee on the OFR’s programmatic approach, progress on prior committee recommendations, subcommittee reports to the committee, and the OFR’s work related to shadow banking.

Two CFTC Advisory Committees to Meet

On Tuesday, February 23, the Commodity Futures Trading Commission’s (CFTC) Technology Advisory Committee will meet to discuss: the CFTC’s proposed Regulation Automated Trading; swap data standardization and harmonization; and blockchain and the potential application of distributed ledger technology to the derivatives market.

Also, on Thursday, February 25, the CFTC’s Energy and Environmental Markets Advisory Committee will meet to discuss: the committee’s report summarizing its 2015 proceedings; the CFTC’s will examine the Commission’s Proposed Order Exempting the Southwest Power Pool from Certain Provisions of the Commodity Exchange Act; and CFTC Staff Preliminary Report regarding the Swap Dealer De Minimis Exception.