What potential impacts could the proposed “Volcker Rule” have on banking entities? The Volcker Rule requirements are part of the Dodd-Frank Act’s Section 619, which contains general prohibitions and restrictions on the ability of banking entities and nonbank financial companies to engage in proprietary trading as well as have certain interests in, or relationships with, a hedge fund or private equity fund.
The Volcker Rule proposal (developed jointly by the Fed, the FDIC, the Office of the Comptroller of the Currency, the Securities and Exchange Commission and the Commodity Futures Trading Commission), clarifies the scope of the Dodd-Frank Act’s prohibitions and provides certain exemptions to these prohibitions. See details in the Fed’s press release, and enter your comments in the official record by Feb. 12, 2012.
Which regulatory provisions should the new Consumer Financial Protection Bureau (CFPB) tackle first?
You can help the bureau determine its top priorities for updating, modifying or eliminating the existing federal consumer financial regulations that came under the CFPB’s authority in July 2011. The regulations transferred from seven other agencies, and the bureau wants to change or end rules that are found to be outdated, unduly burdensome or unnecessary.
Until changes can be made to the existing regulations, the CFPB is republishing them as interim final rules to reflect the transfer of authority, but not to impose any new substantive obligations. See more in the “Interim Final Rules” section of our Dodd-Frank Regulatory Reform Rules web site.
The agency welcomes your comments on the consumer financial regulations by March 5, 2012.
Five regulatory agencies explained in November that they would use the June 30, 2011, Call Reports to decide an institution’s supervisor for federal consumer financial laws.
The Federal Reserve, FDIC, Office of the Comptroller of the Currency (OCC), the National Credit Union Association (NCUA) and the new Consumer Financial Protection Bureau (CFPB) agreed to determine the total asset size of an insured bank, thrift or credit union based on that specific Call Reports release. (The agencies chose the release closest to when the CFPB began operations on July 21, 2011.)
As called for by the Dodd-Frank Act, the CFPB has exclusive authority to examine and primary authority to enforce federal consumer financial laws for institutions with total assets of more than $10 billion, as well as their affiliates. The Fed, FDIC, OOC and NCUA retain their respective supervisory and enforcement authority for the remaining institutions with total assets of $10 billion and under.
To avoid unwarranted uncertainty or volatility, the agencies generally won’t change an institution’s initial classification unless four consecutive quarterly reports indicate that a supervisory change is in order.
Federal agencies hope that new regulations will help avoid harm to the financial system if a large, systemically significant bank holding company (BHC) or nonbank financial company fails.
Such companies are now required to submit annual resolution plans, also called living wills, to the Federal Reserve and the FDIC. The Dodd-Frank Act mandated creating living wills to ensure the rapid and orderly resolution of such companies if they experience material financial distress or failure. In addition to the plan requirements, the final rule details the procedures and standards that the Fed’s Board of Governors and FDIC will use to review resolution plans.
If you commented on the proposed version of the rule between April and June 2011, note that the final rule (effective Nov. 30, 2011) does not include the requirement for the submission of quarterly credit exposure reports. Instead, the Board and FDIC will coordinate development of those reports in conjunction with the Dodd-Frank Act’s single counterparty credit exposure limits.
A related final rule issued by the Federal Reserve requires BHCs with total consolidated assets of $50 billion or more to submit annual capital plans as well as obtain prior approval for certain capital distributions. The rule, effective Dec. 30, 2011, is encompassed in amendments to Regulation Y.