ST. LOUIS - The impact of the FDIC's new resolution authority will ultimately hinge on how the final rules are written and implemented, according to a panel of banking and legal experts who participated in the St. Louis Fed's “The FDIC's Resolution Authority: How Will It Work and Can It Prevent 'Too Big To Fail’?” discussion on Sept. 27.
The guest panelists included Ron J. Feldman, senior vice president for Supervision, Regulation and Credit, Federal Reserve Bank of Minneapolis; Randall Guynn, partner and head of the Financial Institutions Group, Davis Polk and Wardwell, LLP; Kenneth Nelson, executive vice president and corporate treasurer, U.S. Bancorp and Kenneth E. Scott, Ralph M. Parsons Professor of Law and Business Emeritus, and Hoover Institution Senior Research Fellow Emeritus, Stanford University.
Julie Stackhouse, the St. Louis Fed’s senior vice president of Banking Supervision and Regulation, gave opening remarks, and Mary Karr, senior vice president and general counsel, moderated the panel discussion.
“The crisis made clear there were several weaknesses in the U.S. financial and regulatory systems,” Stackhouse said.
These weaknesses included the lack of a mechanism to look across financial firms (bank and nonbank) to identify “systemic risk” implications; the absence of a mechanism to resolve a significant nonbank financial firm other than bankruptcy; an over-reliance on “functional” regulation in bank and financial holding companies; the lack of a safety and soundness regulator for large financial firms that were not bank or financial holding companies, and insufficient consumer protection.
The panelists explored how the ways in which the new resolution authority may be able to address these issues, as well as the legislation's potential unintended consequences.
The next discussion in the Bank's regulatory reform series, "The Financial Stability Oversight Council: Can Systemic Risk Be Contained?” will be held Oct. 25.
Guest speakers confirmed so far include John Dugan, former Comptroller of the Currency; Kenneth M. deRegt, chief risk officer, Morgan Stanley; and Kelly King, chairman and chief executive officer, BB&T Corp. More information coming soon.