Would Dodd-Frank Changes Affect the Region's Banks?

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Would Dodd-Frank Changes Affect the Region’s Banks?

Would Dodd-Frank Changes Affect the Region’s Banks?
From The Financial Services Adviser Newsletter
Published by The Inter-American Dialogue
July 26, 2017


Gene M. Smith, President and Co-Owner of Smith Brandon International, Inc. was one of the contributors to to a Q&A from the July 13 - 26th issue of the Financial Services Adviser Newsletter published by The Inter-American Dialogue. Each of the contributors were asked to answer the question: "Would Dodd-Frank Changes Affect the Region’s Banks?" Her answer is reproduced below:

“The Dodd-Frank Wall Street Reform and Consumer Protection Act was passed in 2010 to address issues related to the financial crisis of 2007-2008, including the accepted premise that many U.S. banks and financial institutions were too big to fail. The Dodd-Frank Act is a complex piece of legislation that amended and extended many earlier financial protections and regulations. Efforts have been underway under the Trump administration to replace this legislation with the equally complex Financial CHOICE (Creating Hope and Opportunity for Investors, Consumers and Entrepreneurs) Act. The House version of the bill passed in June 2017 on a party line vote. Under the leadership of Sen. Mike Crapo (R-Idaho), the Senate version is expected to contain substantial revision of the House bill. Political gridlock is widely anticipated. James Gorman, the CEO of Morgan Stanley, has said repeatedly that he thinks banks would be served well with some tweaks to Dodd-Frank, as opposed to its repeal. Other Wall Street professionals concur. Most of the Financial CHOICE Act’s changes are domestic in focus (for example, reducing leverage requirements, addressing too-big-to-fail and cutting the Consumer Financial Protection Bureau) and may not specifically affect foreign banks. But a principle incorporated in the proposed act is a greater acceptance of both risk and failure, which could re-expose foreign banks to old financial risks, should U.S. banks fail. From our perspective, each financial institution needs to understand its own strengths and vulnerabilities. In Latin America, Brazil and the Caribbean, these entities need to ensure proper enforcement of know-your-customer, anti-money laundering and anti-fraud programs, and work to mitigate their individual risks. Dodd-Frank and the Financial CHOICE Act are at play in a dynamic, difficult environment where learning from the past does not seem to be the priority.”

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