American Bankers Association Contacts
Denyette DePierro (202) 663-5333
Dechert LLP Authors
Thomas P. Vartanian (202) 261-3439
Robert H. Ledig (202) 261-3454
David L. Ansell (202) 261-3433
This Title establishes a new supervisory structure for the risk-based oversight of the U.S. financial system that will focus on:
- Identifying and addressing systemic risks to the stability of the U.S. financial system;
- Bringing nonbank financial companies (companies that are predominantly engaged in financial activities that are not bank holding companies) ("nonbanks") that are determined to be significant to U.S. financial stability under comprehensive financial regulation and supervision; and
- Imposing new and heightened prudential standards for the operation of financial institutions and financial markets in the U.S.
Under this structure, a new entity, the Financial Stability Oversight Council ("Oversight Council"), is created. It is intended to bring together a broad range of financial regulatory agencies in an attempt to ensure that developments or practices anywhere throughout the financial services sector of the economy that might ultimately have a systemic impact are considered and addressed on an inter-agency basis. The Oversight Council is responsible for determining which nonbanks will be subject to comprehensive Federal regulation, and it has significant authority to make recommendations to the Board of Governors of the Federal Reserve System ("Fed") for the implementation of the heightened prudential standards to be applied to bank holding companies ("BHCs") with total consolidated assets of $50 billion or more and designated nonbanks and to make similar recommendations to other financial regulatory agencies.
The Fed is given the principal operational role in carrying out Congress' intention to address systemic risk. The Fed will make determinations on how heightened prudential standards will be implemented and, in some cases, whether particular standards suggested by Congress will be implemented. This will include a new form of prompt corrective action rules at the holding company level. The Fed will have authority to determine how it will conduct its regulation of nonbank companies that are required to register with the Fed because they are considered to have the potential to pose a threat to U.S. financial stability.
More broadly, the Federal financial regulatory agencies, and the Federal banking agencies, in particular, are expected to work together in their roles on the Oversight Council and in other contexts required by Title I to seek to proactively address potential systemic problems, including by strengthening capital requirements to address potential areas of concern.
The following links provide expanded analysis within this section: