Senate Banking Committee Chairman Mike Crapo, has recently proposed a bill in order to increase the Federal reserve by approximately $250 billion with a growing advantage of $50 billion. This bill has presented itself as a major blessing for the small investment banks.
Earlier, stricter laws and policies were framed for smaller banks, which decreased their scope of development. The proposed bill is meant to relax few of the rules and regulations to uplift the small community banking sector.
Initially, the bill faced a fierce opposition from Senator Elizabeth Warren whereas it was supported by the Democratic committee. Another set of beneficiaries are Bank of New York Mellon ($372 billion), State Street ($238 billion) and Northern Trust Corp ($139 billion).
Basically, smaller financial banks offer services to customers for the deposition of savings and loaning of capital. Besides this, they also provide financial back-up to small business firms, industries, mutual funds and unorganized sectors for establishing new ventures. In short, financial services which are not provided by large banks or bigger financial firms, in those cases, role of small banks come into play.
However, there are risks involved with small financial banks. Whereas, the investments made in the Federal banks are risk free. This acceptance of the bill could boost the income up to 8% for the biggest custody banks.
Although, owners of custody businesses, JPMorgan Chase and Citigroup have been denied this relaxation. As per the 2017 reports from the U.S. Treasury on financial laws, small scale banks will be allowed to exclude the Federal savings and remain independent.
The only pitfall in this bill is the selection of such custody banks that the common people are unaware of. This shows the level of negligence by the current government and other politicians.