Bank regulation: no presents yet Regardless of political change, investors should demand that banks hold enough capital Santa hasn't yet arrived on Wall Street. The big banks do have plenty of Republican friends - two-thirds of political donations made by the financial services industry went to the GOP, which has just taken control of both houses of Congress. The presents, however, may go to smaller banks first. The big banks may be hoping for a shiny package in the form of a rewrite of the Dodd-Frank financial reforms, which have hamstrung the sector in the aftermath of the financial crisis. Richard Shelby is an outspoken critic of Dodd-Frank - and the Republican senator from Alabama is set to become the new Senate banking committee chair. Yet he has also called for higher capital requirements for the biggest banks and less oversight for smaller community and regional banks. This means that Congress could well raise the asset threshold that determines what counts as a systemically important financial institution (Sifi). Analysts predict the limit will go up from $50bn to $100bn. Such a change would help the likes of KeyCorp and Comerica. Status as a Sifi means more onerous stress tests and having to hold more capital, which limits the ability to pay dividends. Banks with assets below $50bn have been outperforming compared with their bigger rivals. The regulatory difference may or may not have helped them, but it cannot have hurt, either. Losing Sifi status will not necessarily encourage regional banks to take on leverage. The regionals" business is vanilla banking - taking deposits and making loans. Investors, scarred by the crisis, might insist on a healthy level of capital. But previous banking conflagrations show that in good times regional banks like to pile on leverage almost as much as big ones. Investors should demand that banks hold enough capital and shun those that depend on high leverage to make money, rather than wait for senators to do the job for them. Regulatory gifts are easily taken back.