Tarullo addresses Dodd-Frank's impact on mid-sized banks

The aims of prudential regulation for traditional banking organisations should vary according to their size, scope and range of activities, Federal Reserve board governor Daniel Tarullo said in a speech in Chicago today, adding that by specifying these aims with more precision, regulators can shape a more effective and efficient regulatory system.

Tarullo discussed the "80 or so" US banks that have assets of at least $10 billion, but are not among the country's eight largest lenders that have been designated systemically important globally. These "vary enormously in size" and bridge the $50 billion threshold for enhanced prudential standards established by the Dodd-Frank Act, he noted.

"Yet, whatever their size, most banking organisations in this group are overwhelmingly recognisable as traditional commercial banks," Tarullo said, adding: "The key question is whether $50 billion is the right line to have drawn".

"The line might better be drawn at a higher asset level – $100 billion, perhaps," Tarullo mused. "Bank holding companies with less than $100 billion in assets would not be subject to any of the enhanced prudential requirements of [Dodd-Frank, while] bank holding companies with assets between $100 billion and $250 billion would be subject to supervisory stress testing".