FDIC Senior Leaders
Front row (left to right): Director Thomas Curry, Chairman Sheila Bair, Vice Chairman Martin Gruenberg.
Middle row (left to right): Jason Cave,Mitchell Glassman (retired), Sandra Thompson, James Angel, Cottrell Webster, Arthur Murton, Arleas Upton Kea, Thom Terwilliger.
Back row (left to right): Jesse Villarreal, Bret Edwards, D. Michael Collins, Russell Pittman, Steven App, and Andrew Gray.
Not pictured: Michael Krimminger, Paul Nash, and Fred Cams.
Dodd-Frank Wall Street Reform and Consumer Protection Act
Enacted on July 21, 2010, the Dodd-
Frank Wall Street Reform and Consumer
Protection Act (the Dodd-Frank Act
or the Act) provides the most comprehensive
legislative reform of the U.S. financial sector
since the 1930s. Aimed at addressing the causes
of the financial crisis of the last few years, the
Act, among other things, provides for a more
comprehensive, macro perspective for identifying
and taking action in response to emerging risks
in financial sectors and closing regulatory gaps;
heightened prudential supervision of systemically
important nonbank financial companies and large,
interconnected bank holding companies; orderly
liquidation of systemically important nonbank
financial companies and bank holding companies;
elimination of open assistance to preserve a
failing insured depository institution; improved
consumer financial protections and mortgage
lending practices; and enhanced transparency
and supervision of over-the-counter derivatives,
swaps, and securities activities; and other investor
protections. The Act significantly impacts the
FDIC in its roles as supervisor, receiver, and
deposit insurer, as well as making changes to the
FDICs corporate structure.
Supervision
The Dodd-Frank Act creates a new risk oversight
umbrella group, the Financial Stability Oversight
Council (FSOC). In an effort to mitigate potential
systemic risks, the FSOC is empowered to
designate certain nonbank financial companies
for supervision by the Board of Governors of
the Federal Reserve System (Federal Reserve)
and to make recommendations for heightened
prudential supervision of those nonbank financial
companies and bank holding companies with total
consolidated assets of $50 billion or more. The
FSOC also may designate systemically important
financial market utilities or payment, clearing
or settlement activities. The FDIC is one of ten
voting members of the FSOC.
The FSOCs recommendations may include,
for example, leverage limits, risk-based capital
requirements, liquidity requirements, and
concentration limits. The Federal Reserve will
be responsible for implementing heightened
prudential standards and supervising such firms.
These firms also may be subject to orderly
liquidation under Title II of the Act, in which
the FDIC will act as receiver to resolve the firm
through a process similar to that used to resolve
failed insured depository institutions. The Act
requires the FDIC and the Federal Reserve to issue
joint regulations implementing the requirement
that these systemically important financial
companies develop plans for their rapid and
orderly resolution in the event of material financial
distress or failure. It also gives the FDIC backup
examination authority over these systemically
important financial companies.
The Dodd-Frank Act abolishes the Office
of Thrift Supervision (OTS) and transfers
responsibility for thrift supervision to the Office
of the Comptroller of the Currency (OCC) and the FDIC, as of the statutory transfer date (i.e.,
July 21, 2011). The FDIC will be responsible for
the supervision of state chartered thrifts, while the
OCC will supervise federal thrifts. The Federal
Reserve will supervise thrift holding companies
and their non-depository institution subsidiaries.
The Dodd-Frank Act also creates a new Consumer
Financial Protection Bureau (CFPB) within the
Federal Reserve System. The CFPB will have
exclusive rulemaking authority for specified federal
consumer protection laws and will also have
examination and primary enforcement authority
for many nonbank financial service providers and
insured depository institutions (IDIs) and credit
unions with total assets of over $10 billion (and
any affiliated IDIs). With regard to IDIs over $10
billion otherwise in its jurisdiction, the FDIC
will have backup enforcement authority for laws
over which the CFPB has primary authority. The
FDIC retains its current authority and programs
under the Community Reinvestment Act and
other consumer related laws not specified for
all IDIs within its jurisdiction. It also retains all
examination and enforcement authorities over
IDIs with total assets of $10 billion or less within
its jurisdiction. Examination coordination and
information sharing with the new CFPB
is required.
Receivership
As noted, the FDIC may be appointed as receiver
for a failed systemically significant nonbank
financial company or large, interconnected
bank holding company. The orderly liquidation
authority is similar to the resolution authority for
IDIs under the Federal Deposit Insurance Act.
However, no monies from the DIF may be used in
connection with an orderly liquidation under Title
II of the Act. Those resolutions will be funded
initially by borrowing against the assets of the
failed financial company, with the borrowings to
be repaid from asset sales and, if necessary, from
clawbacks of certain additional payments and
from additional risk-based assessments against
large financial companies. The Act expressly
prohibits the use of taxpayer funds to prevent the
liquidation of any financial company under Title
II, and taxpayers shall bear no losses from the
exercise of any authority under Title II.
Deposit Insurance
The Dodd-Frank Act permanently increases
the standard maximum deposit insurance
amount to $250,000, and made the increase
retroactive to January 1, 2008. The Act also
provides temporary unlimited deposit insurance
coverage for noninterest-bearing transaction
accounts for two years from December 31, 2010,
through December 31, 2012. During this time,
all noninterest-bearing transaction accounts
are fully insured, regardless of the balance in
the account and the ownership capacity of the
funds. This coverage is available to all depositors,
including consumers, businesses, and government
entities. The unlimited coverage is separate
from, and in addition to, the standard insurance
coverage provided for a depositors other accounts
held at an FDIC-insured bank.
The Act directs the FDIC to amend its regulations
to define assessment base as average consolidated
total assets minus average tangible equity. For
custodial banks and bankers banks, the FDIC
may subtract an additional amount as necessary to
ensure that the assessment appropriately reflects
the risk posed by such institutions.
The Act eliminates the maximum limitation
on the designated reserve ratio (DRR) and
raises the minimum DRR from 1.15 percent to 1.35 percent of estimated insured deposits. It
requires the FDIC to take such steps as may be
necessary for the reserve ratio of the DIF to reach
1.35 percent of estimated insured deposits by
September 30, 2020. The FDIC must offset the
effect on IDIs with total consolidated assets of
less than $10 billion of this one-time requirement
to reach 1.35 percent by that date rather than
1.15 percent by the end of 2016. The Act also
eliminates the payment of dividends from the DIF
when the reserve ratio is between 1.35 percent
and 1.50 percent and provides the FDIC sole
discretion to limit or suspend dividends when the
reserve ratio exceeds 1.50 percent.
FDIC Corporate Structure
The Dodd-Frank Act places the Director of the
CFPB on the FDIC Board in lieu of the Director
of the OTS. In addition, the Act requires the
FDIC to establish by January 21, 2011, an Office
of Minority and Women Inclusion (OMWI)
to develop standards for equal employment
opportunity and the racial, ethnic, and gender
diversity of the agencys workforce and senior
management; increase participation of minority- and
women-owned businesses in agency programs
and contracts; and assess the diversity policies and
practices of entities regulated by the agency. The
OMWI is also to advise the agency on the impact
of policies and regulations on minority- and
women-owned businesses. The FDIC transferred
the responsibilities of the Office of Diversity and
Economic Opportunity to OMWI, effective
January 21, 2011.
Other Financial
Regulatory Reforms
The Act also makes a number of other
reforms, including:
- Requiring that minimum leverage and
risk-based capital requirements for IDIs,
depository institution holding companies and
nonbank financial companies supervised by
the Federal Reserve can be no lower than the
generally applicable requirements in effect on
July 21, 2010 (the Collins Amendment);
- Prohibiting bank holding companies and
their affiliates from engaging in proprietary
trading or sponsoring or investing in a hedge
fund or private equity fund (the so-called
Volcker Rule);
- Requiring greater transparency and regulation
of over-the-counter derivatives, assetbacked
securities (including risk retention
requirements), hedge funds, mortgage brokers
and payday lenders;
- Requiring the financial regulators to
prohibit incentive compensation at financial
institutions that encourages excessive
risk taking;
- Providing new rules for transparency and
accountability for credit rating agencies and
requiring regulators to eliminate regulatory
reliance on credit ratings; and
- Establishing a Federal Insurance Office to,
among other things, participate in the FSOC
and monitor issues in the insurance industry.
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