On March 14, 2018, the US Senate voted (67-31) to advance S. 2155, the Economic Growth, Regulatory Relief, and Consumer Protection Act (the Bill). The Bill, which will only become law with approval from the House and Congress, marks an unprecedented, bipartisan compromise to ease banking rules enacted following the 2008-09 financial crisis. If enacted, there may soon be good reason to anticipate a spike in M&A activity among mid-sized US financial institutions, including a possible increase in cross-border M&A activity involving Canadian institutions.

Proposed changes: an overview

Under current law, financial institutions with $50 billion or more in assets are considered “systematically important financial institutions” (SIFIs). SIFIs are considered to be firms that would pose a serious risk to the economy in the event of their collapse and, as a result, are subject to stricter federal oversight. For example, SIFIs are required to maintain more cash on hand and submit to certain “stress tests” designed to gauge how they would fare in the event of a repeat financial crisis.

The Bill proposes to change the enhanced compliance requirements, which have dissuaded many financial institutions below the SIFI threshold from considering value-adding transactions.  If enacted, the Bill would, among other things, increase the threshold at which financial institutions will become subject to increased federal oversight. In particular, the Bill would raise the SIFI threshold, from $50 billion to $250 billion, in effect freeing up many regional financial institutions from increased regulatory scrutiny.


In rolling back US regulatory requirements, the Bill contributes to a shift occurring in the US banking regulatory environment. In the context of the wider regulatory environment, the proposed reforms suggest the possibility for an increase in M&A activity among mid-sized US financial institutions, which may include the possibility of cross-border M&A activity involving Canadian institutions.  Strictly speaking, economies of scale will continue to drive M&A activity among financial institutions. However, the Bill and accompanying regulatory reforms should provide financial institutions with an impetus to enter value-adding negotiations.

It remains to be seen how the Bill would be reconciled with an earlier and more expansive bill passed by the House, and in what form the Bill will be ultimately passed by Congress and signed by the US President.

The author would like to thank Blanchart Arun, Articling Student, for his assistance in preparing this legal update.

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