Editors' pick: Originally published Nov. 9.
Donald Trump's remarkable election as president and the Republican sweep of Congress offer a boon for mergers among mid-sized regional banks while dealing a potential blow to the biggest financial institutions through a House plan to change, if not repeal, the Dodd-Frank financial reform law.
The results have opened the door over the next couple of years for legislation that would raise the $50 billion threshold at which a big bank automatically becomes designated systemically important to some higher level, regulatory analysts in Washington said.
Banks designated as systemically important financial institutions, or SIFIs, are subject to tougher liquidity requirements as well as an obligation to draft living wills explaining how they would unwind themselves in bankruptcy. Republicans had been seeking to raise the threshold to $500 billion, but a $250 billion limit is more likely.
Raising the SIFI threshold at least somewhat is a real possibility, said Don Lamson, of counsel at Squire Patton Boggs in Washington and a former regulator at the Office of the Comptroller of the Currency.
Further, "if you do raise the SIFI threshold, you will see more merger activity," Lamson said.
Banks that would benefit from a SIFI threshold hike -- and ones that might consider engaging in M&A once the restriction is increased -- include Zions Bancorp (ZION) , CIT (CIT) , Comerica (CMA) and Huntington Bancshares (HBAN) , as well as a few other regional banks with small-enough asset bases to curb the risk of crossing a SIFI threshold.