ABA Dodd-Frank Tracker

BPC Report on Title II and the Bankruptcy Code

2013-05-14T15:59:00.001-04:00

The Bipartisan Policy Center’s (BPC) Financial Regulatory Reform Initiative released a report titled Too Big to Fail: A Path Forward which analyzes whether the Bankruptcy Code and/or the Orderly Liquidation Authority (OLA) under Title II of the Dodd-Frank Act are able to provide the necessary tools to resolve large firms while avoiding contagious panic or resorting to taxpayer funded bailouts.

The report concludes that the FDIC’s proposed recapitalization strategy for failing but systemically important firms, carried out under the Dodd-Frank Act’s orderly liquidation authority or the bankruptcy code, should solve the “too big to fail” problem.

The report examined the FDIC’s proposed “single point of entry” recapitalization plan, which imposes losses on a financial firm’s shareholders and unsecured debt holders but not on taxpayers.

The report also includes recommendation on ways to improve regulation, reduce duplication and eliminate inefficiencies in resolution planning, the so-called ‘living wills’ put into place in Dodd-Frank.

Read the full report.

Fed, FDIC Issue Guidance on Resolution Plans for Large Firms

2013-04-16T13:47:00.002-04:00

The Federal Reserve and the FDIC have issued guidance and clarification for the first 11 financial firms that filed plans for their potential orderly resolution, as required by the Dodd-Frank Act.

The firms—with nonbank assets of $250 billion and up—filed their initial plans last year. The agencies’ guidance provides further information on what the firms should include in their 2013 plans, including details on potential obstacles to an orderly resolution under the Bankruptcy Code and analysis of the plans’ underlying assumptions.

The agencies also extended the 2013 filing deadline from July 1 to October 1.

Read more.

Sen. Warner Calls for DFA Corrections Bill in Next Congress

2012-10-19T09:19:00.000-04:00

Senate Banking Committee member Mark Warner (D-Va.) told the Bipartisan Policy Center yesterday that he hopes the 113th Congress will be able to consider a technical corrections bill to the Dodd Frank Act.

Congress never gets it right, when you’re looking at massive reform legislation the first time through. You directionally head in an area and then you come back, two years, three years hence to do a corrections legislation.

He added that he had issues with the law, but he dismissed the idea of repealing it altogether.

He also provided some ideas for improving Dodd-Frank. They included basing the Volcker Rule more on principles than rigid rules; tightening up the resolution authority mechanism to ensure it’s the absolute last resort for a failing financial firm; and revisiting derivatives reforms and transparency goals.

Watch a video of Warner addressing the Bipartisan Policy Center.

Bipartisan Policy Center Launches Financial Regulatory Reform Initiative

2012-10-18T13:46:00.004-04:00

The Bipartisan Policy Center launched a Financial Regulatory Reform Initiative with the goal of producing “bipartisan consensus reforms to our financial regulatory system to promote long-term sustainable economic growth.” Along with a webcast to launch the initiative, they released an introductory paper discussing the five areas of the study. Those areas of study—systemic risk, failure resolution, capital markets and the Volker rule, consumer financial protection, and regulatory architecture—will be released as a series of white papers beginning in the spring of 2013.

Read the introductory paper.
Visit the initiative launch page for more information including a webcast of the launch.

CFTC and CFPB Request for Comments, FDIC Final Rule on Resolution Plans

2011-11-01T12:36:00.002-04:00

The CFTC’s request for comments on a proposed amendment to a final order (“July 14 Order”) that would extend the temporary exemptive relief from certain provisions of the CEA that otherwise would have taken effect on the general effective date of title VII of the Dodd-Frank Act was published in the Federal Register.
Comments are due November 25th.
Read more.

The CFPB’s request for comments on a PRA notice about the anticipated undertaking of a variety of service delivery-focused activities under the Dodd-Frank Act was published in the Federal Register.
Comments are due December 30th.
Read more.

The FDIC’s final rule which requires each nonbank financial company designated by the Financial Stability Oversight Council for enhanced supervision and each bank holding company with assets over $50 billion to report a plan for rapid and orderly resolution in the event of material financial distress or failure was published in the Federal Register.
The rule is effective on November 30, 2011.
Read more.

Fed and Treasury Approve Final SIFI Resolution Plan

2011-10-17T11:28:00.000-04:00

The Federal Reserve Board and Treasury announced the approval of a final rule to implement the SIFI resolution plan requirement.

The final rule requires bank holding companies with assets of $50 billion or more and nonbank financial firms designated by the Financial Stability Oversight Council for supervision by the Board to annually submit resolution plans to the Board and the Federal Deposit Insurance Corporation.

Read the final rule.

FDIC Approves Final Rules on ‘Living Wills’ & Large-Bank Assessment Adjustments

2011-09-14T08:42:00.000-04:00

The FDIC Board adopted three rules yesterday: living wills for (1) large banks and (2) large banks not subject to the bankruptcy code and (3) adjustments to assessments for large banks.

1. The FDIC Board approved a final rule -- issued jointly with the Federal Reserve -- that requires bank holding companies with consolidated assets of $50 billion or more and nonbank financial companies that the Financial Stability Oversight Council designates as systemically significant to submit periodic resolution plans.

The final rule, which will apply to 124 financial firms, requires the plan to describe the company's strategy for rapid and orderly resolution in bankruptcy during times of financial distress.

The Fed is expected to approve the Dodd-Frank Act-mandated rule later this month.

2. The FDIC Board also approved an interim final rule that would clarify that government-insured banks with $50 billion or more in total assets -- not subject to the U.S. Bankruptcy Code -- also would be required to submit periodic resolution plans to the FDIC.

The interim final rule would affect 37 federally insured banks and thrifts.

3. The Board also approved final guidelines that will govern assessment-rate adjustments under the new pricing system for banks with more than $10 billion in assets that went into effect in the second quarter.

The large-bank pricing rule authorizes the FDIC to adjust an institution's total score by 15 points, up or down.

Fed Issued Report on International Bankruptcy Coordination for SIFIs

2011-07-21T15:13:00.000-04:00

The Federal Reserve issued a Dodd-Frank mandated review of international coordination regarding the bankruptcy of a systemically important financial institution (SIFI).

The reported noted:

There is no expectation that all future insolvencies of multinational SIFIs can be avoided.

The ultimate shared goal is, therefore, an effective cross-border resolution mechanism that minimizes
the impact of such a failure on the public purse and the financial system as a whole.

The report noted numerous barriers to cross-border coordination, yet recommended the following:

the development of resolution plans or frameworks,
the development of cooperation and coordination agreements, and,
increased access to and sharing of information by regulatory authorities in times of stress.

See the report.

FSB Releases Comprehensive SIFI Resolution Plan For Comment

2011-07-19T15:39:00.000-04:00

The Financial Stability Board is seeking comment on a consultative document outlining the effective resolution of systemically important financial institutions.

The comprehensive package contains policies to resolve systemically important firms without market disruption or taxpayer exposure.

The document includes questions on resolution powers, cross-border arrangements, resolution planning and creditor hierarchy, among other issues.

Comments and responses to questions must be submitted by Friday, September 2, 2011.

See the document.

FSOC: Orderly Resolution Effective Without Secured Creditor Haircuts

2011-07-19T14:49:00.000-04:00

The FSOC released a study that found that Dodd-Frank’s orderly liquidation authority effectively achieves market discipline and taxpayer protection without secured creditor haircuts - the practice of treating a portion of a fully secured creditors’ claims as unsecured.

Proponents said haircuts they would cause more extensive credit analysis and discourage creditors from making value-destroying actions, while opponents say they would reduce financial stability and force firms to rely on alternative funding sources – reducing the funding available if a company were to fail.

See the report.

GAO Found Bankruptcy Not Effective For Resolving Complex Financial Institutions

2011-07-19T14:28:00.000-04:00

In a study released today, the GAO found the bankruptcy code is not an effective tool in resolving failed financial institutions.

The effectiveness of the Bankruptcy Code in resolving failed complex financial institutions is unclear for several reasons, including that criteria are not well-developed, a paucity of data, and the complex activities and organizational structures of financial institutions.

Experts agreed that maximizing asset values and minimizing systemic impacts are potential criteria for judging effectiveness, but the Code does not directly address systemic factors in bankruptcies.

The report found that certain attributes of complex financial institutions complicate bankruptcy as a viable resolution option:

highly liquid funding sources;
use of derivatives;
complex legal structures; and,
international scope of operations.

See the report.

FDIC Approved Orderly Liquidation Rule with Compensation Claw Back

2011-07-06T15:21:00.001-04:00

The FDIC approved a final rule that further implements Dodd-Frank’s orderly liquidation authority for systemically important financial institutions.

The rule creates an order of claims procedure and ensures the receiver is able to avoid fraudulent and preferential transfers.

Additionally, the rule creates a 2-year recoupment period of any compensation for senior executives that were “substantially responsible” for the condition of the failed institution. The rule allows for unlimited recoupment, beyond 2 years, in the event of fraud.

The rule is effective 30 days after publication in the Federal Register.
See the final rule.

Bair Calls for Congress to Support Regulators; Outlines Reg Reform Priorities

2011-06-30T15:18:00.002-04:00

In her last scheduled address on the Hill, FDIC Chairman Sheila Bair called for Congress to support banking regulators in their efforts to implement Dodd-Frank and outlined the major priorities of reg reform.

The regulators charged with carrying out the implementation of these reforms will need your full support and encouragement if they are to be successful in their work.

Our highest near-term regulatory priorities are two-fold: 1) implementing the various regulatory mandates that make up the new resolution framework for SIFIs, and 2) strengthening and harmonizing capital and liquidity requirements for banks and bank holding companies under the Basel III protocol and Section 171 of the Dodd-Frank Act, the Collins Amendment.

Bair detailed the FDIC’s role in consumer protection, as it will retain primary supervision for small firms:

An important part of the consultation process will involve making sure the CFPB understands the inter-relationship between consumer protection and safety and soundness, and also takes into account the potential impacts of its regulations on small, community banks.

Read Bair’s testimony.

FDIC To Meet July 6 on Liquidation Authority

2011-06-30T08:47:00.000-04:00

The FDIC Board will meet at 10:00 a.m. EST on July 6 to discuss rules pertaining to its orderly liquidation authority and resolution and credit exposure reports.

Watch the meeting here.
See the agenda.

Bachus & Neugebauer Request Audit of FSOC

2011-06-23T11:48:00.000-04:00

House Financial Services Committee Chairman Spencer Bachus (R-AL) and Oversight and Investigations Subcommittee Chairman Randy Neugebauer (R-TX) yesterday asked the Government Accountability Office to conduct an audit of the Financial Stability Oversight Council (FSOC) to review:

FSOC’s staffing, operations, and budget;
its process for reviewing and addressing public comments;
its methods for determining which non-bank financial institutions will be designated for heightened supervision and regulation by the Federal Reserve;
the operation and plans for the Office of Financial Research; and,
FSOC’s plans for safeguarding proprietary information and consumer data.

See the request.

FDIC Bair Testifies Today – Focus On QRM, Capital, TBTF

2011-06-22T10:08:00.002-04:00

FDIC’s Bair will make her final testimony on the Hill today. Appearing before the House Oversight Committee at 1:30 p.m. EST, Bair will be discussing the changing role of the FDIC.

Chairman Patrick McHenry’s opening remarks focus on the risk-retention proposal, concerns about excessive capital requirements, and Dodd-Frank's attempt to end too-big-to-fail and other systemic risks.

McHenry will state:

New risk retention rules could reduce the amount of lending to an already crippled housing market, while extreme capital standards may jeopardize the global competitiveness of U.S. financial institutions.

Watch the hearing.

FDIC’s Systemic Resolution Committee Meets Today

2011-06-21T08:51:00.000-04:00

The FDIC’s Systemic Resolution Advisory Committee is meeting all day today to discuss:

New resolution framework
The liquidation of Lehman Brothers
International resolution issues
Derivatives

See the agenda and members of the committee.
Watch the meeting.

Fed's Tarullo Talks About SIFIs and Basel III

2011-06-03T12:45:00.000-04:00

Federal Reserve Governor Tarullo gave a speech today on the importance of regulating systemic threats and of Basel III capital rules.

Tarullo explained that “the pre-crisis regulatory regime had focused mostly on firm-specific or… "microprudential" risks. Even on its own terms, that regime was not up to the task of assuring safe and sound financial firms. But it did not even attempt to address the broader systemic risks.”

Authorities under the Dodd-Frank Act give regulators the tools to assess risk in the system as a whole, and to address large institutions that may pose systemic risk, but have not been subject to supervision, Tarullo stated.

Tarullo highlighted Basel III requirements – “key components of the post-crisis reform agenda” – that help support systemic safety, including “better quality of capital, improved risk weightings, higher minimum capital ratios, and a capital conservation buffer.”

See the speech.

FDIC Systemic Resolution Advisory Cmt to Meet June 21

2011-06-03T11:21:00.003-04:00

On June 21 from 8:30 a.m. to 4:00 p.m. EST, the FDIC Systemic Resolution Advisory Committee will hold an open meeting to discuss various issues regarding the Dodd-Frank resolution authority.

Some members of the 18-person committee include:

Former Federal Reserve Chairman Paul Volcker
Former Citigroup Inc. co-chairman John Reed
BlackRock fixed-income chief Peter Fisher
Former SEC Chairman William Donaldson
Former Fed governor Donald Kohn
Standard & Poor’s President Deven Sharma

No specifics about the agenda were provided.
See the release.
Watch the meeting here.

Fed Seeks Comment on Two Bankruptcy Studies

2011-04-21T12:26:00.001-04:00

The Federal Reserve issued a request for comment on two studies mandated by Dodd-Frank:

(1) resolution of a financial company under Chapter 7 and Chapter 11 of the bankruptcy code and
(2) international coordination of systemically important financial companies.

The Fed is seeking specific issues that should be included in the studies, as well as any additional research that it should consider.

Comments must be submitted within 30 days from the date of publication in the Federal Register.

See the proposal.

FDIC Releases Report on Lehman & Its Orderly Resolution Authority

2011-04-18T08:58:00.000-04:00

The FDIC released a report detailing how the FDIC would have addressed Lehman Brothers if it had Dodd-Frank’s orderly resolution authority during the financial crisis.

The report states that managing the failure of Lehman under the resolution authority “could have promoted systemic stability while recovering substantially more for creditors than the bankruptcy proceedings -- and at no cost to taxpayers.”

The FDIC estimates that using its new orderly resolution authority – providing short-term liquidity, offering loss-share arrangements, or creating a good-firm/bad-firm structure – could have recovered 97 cents on every $1 for general unsecured creditors, compared to 21 cents under the most recent bankruptcy plan.

FDIC Chairman Sheila Bair said, "This new report is an important step in ensuring that the public and market participants understand how the FDIC's new resolution authority for large systemic firms works.”

Read the report.

Fed Issues Resolution Plan and Credit Exposure Reporting Proposal

2011-04-12T16:25:00.000-04:00

The Federal Reserve is seeking comment on a Dodd-Frank mandated proposal for large (+$50 billion in assets), systemically significant bank holding companies and nonbank financial companies designated by the Financial Stability Oversight Council to submit annual resolution plans and quarterly credit exposure reports.

The annual resolution plan would describe the company's strategy for rapid and orderly resolution times of financial distress and include a description of all interconnections among major business lines.

The quarterly credit exposure report would be required to describe the nature and extent of the company's credit exposure to other large financial companies, as well as the nature and extent of credit exposure by other large financial companies to the company.

Comments on the proposal are due June 10, 2011.

See the proposal.

Federal Register Update – Final CLA, TILA Rules; CFPB Seeks TILA/RESPA Insight

2011-04-06T15:54:00.004-04:00

1. The Federal Reserve released final rules amending the Consumer Leasing Act (CLA) and the Truth in Lending Act (TILA), increasing the threshold for exempt leases from $25,000 to $50,000. The effective date for each rule is July 21, 2011.
See the CLA rule.
See the TILA rule.

2. The Fed’s proposed financial market utilities rule was published in the Federal Register, setting a comment letter due date of May 19, 2011.
The rule was originally proposed on March 30, 2011.
Read the proposed rule here.

3. The SEC’s proposal on listing standards for compensation committees, originally issued March 30, was published in the Federal Register. Comments are due April 29, 2011.
Read the proposed rule.

4. The CFPB issued a request for comment on the integration of the Truth in Lending Act and the Real Estate Settlement Procedures Act for residential mortgage loans. Comments should be submitted on or before May 5, 2011.
See the request.

5. Comments regarding the CFTC’s notice setting reporting requirements for swap transactions entered into before July 21, 2010 (pre-enactment swap transactions) are due May 4, 2011.
Read the proposal.

ABA Supports Broad Dialogue on FDIC's Resolution Authority

2011-03-30T17:52:00.000-04:00

ABA commented to the FDIC that it "strongly supports Chairman Bair’s suggestion for FDIC-hosted industry roundtable" on the proposed orderly liquidation authority structure.

"ABA supports the development of a mechanism for the orderly resolution of systemically important non-bank financial companies and appreciates the work of the FDIC to devote high-level attention to this important task."

In the letter, ABA responds to six questions posed by the FDIC on its new resolution authority.

Read the letter.

FDIC Issues Risk-Retention & Living Will Proposals

2011-03-29T11:08:00.001-04:00

The FDIC Board approved a notice of proposed rulemaking to implement the Dodd-Frank Act’s credit risk-retention requirements. The Federal Reserve, FHFA, HUD, OCC, and SEC are simultaneously considering the proposal this week.

The proposal would set conservative standards for “qualified residential mortgages" (QRM), which are exempt from the risk retention requirement. Those standards include a 20-percent down payment requirement, a maximum loan-to-value ratio of 80 percent, specific debt-to-income ratios and no 60-day delinquencies on any debt within the past 24 months.

Certain servicing requirements also would be built into the QRM test, including loss mitigation procedures. The proposal also outlines underwriting standards for other asset classes used in securitizations, including auto loans, commercial loans and commercial real estate loans, and sets terms for which a portion of the risk retention can be allocated to other parties.

The risk retention requirements would not apply to government-guaranteed securitizations and assets.

See FDIC Chairman Bair's comments on the proposed rule.

The FDIC also issued a proposal on resolution plans (living wills) and credit exposures. The proposal will be issued jointly with the Federal Reserve.

Read a computer-generated transcript of the FDIC meeting.
Once available, the proposals will be published here.