Regulatory Reorganization (§§ 300 – 378)

Compared to other countries, the US financial regulatory structure is highly fragmented, and—as the financial crisis has demonstrated—presents a number of challenges in today’s highly interconnected and global economy. With respect to the banking industry alone, the US has six federal prudential regulators: the Federal Reserve, the FDIC, the Office of the Comptroller of the Currency (OCC), the National Credit Union Administration (NCUA), the Federal Housing Finance Agency (FHFA), and the Office of Thrift Supervision (OTS). Operating alongside these entities are various market regulators such as the SEC, the CFTC, the Federal Trade Commission (FTC), and a host of other regulatory agencies at the federal and state level. No other country has a similarly complex financial regulatory structure, making the United States unique in its “alphabet soup” of regulators. 

Dissolution of the OTS (§§ 311 – 327)

Despite the numerous hearings in which the testifying experts overwhelmingly favored consolidation of the US financial regulatory structure, Congress has decided to dissolve only one agency—the OTS. As the issuer of charters for federal savings associations (commonly called thrifts) and the regulator of federal and state thrifts and savings and loan holding companies (SLHCs), the OTS has faced a considerable amount of criticism as many of the institutions it has regulated and supervised have required bailouts or been placed into FDIC receivership or bankruptcy. Effective one year after the enactment of the legislation (with a potential extension of up to six months), the OTS will be abolished and its relevant authorities divided among the survivors of the regulatory reorganization. The Federal Reserve will regulate and supervise SLHCs; the OCC will regulate and supervise federally chartered thrifts; and the FDIC will regulate state-chartered insured thrifts. The current array of OTS regulations will remain in effect and be transferred as appropriate to the jurisdictions of the Federal Reserve, the OCC, and the FDIC. However, to the extent the transferred OTS regulations are irreconcilable with similar requirements (i.e., capital and leverage ratios) issued by the agencies assuming the OTS’s former powers, the OTS regulations seem unlikely to survive.


Primary regulators of financial institutions
Type of Financial Institution Primary Federal Supervisor
Bank Holding Companies Federal Reserve
Financial Holding Companies Federal Reserve
S&L/Thrift Holding Companies Federal Reserve
National Banks OCC
Federally Chartered Thrifts OCC
State-Chartered Member Banks
of the Federal Reserve System
Federal Reserve
FDIC-Insured State-Chartered
Non-Member Banks
FDIC-Insured State-Chartered
Federal Credit Unions NCUA
FDIC-Insured State-Chartered
Credit Unions
Fannie Mae, Freddie Mac,
& Federal Home Loan Banks

Regulation and Supervision in the Banking Industry (§ 604)

In addition to abolishing the OTS, the legislation makes subtle but significant changes to the present regulatory structure. Under current law, the Federal Reserve has regulatory and supervisory authority over all BHCs and financial holding companies (FHCs), but is limited in its ability to take measures against certain functionally regulated subsidiaries (e.g., SEC- or CFTC-regulated entities) of these holding companies. This limited authority is generally referred to as “Fed Lite.” 

Many believe a major cause of the crisis was a lack of coordination among regulators, combined with a lack of accountability for any single regulator supervising a complex financial institution in its entirety. Consequently, the legislation authorizes the Federal Reserve to make examinations and bring enforcement actions against subsidiaries of the holding companies it primarily regulates, regardless whether such subsidiaries are also regulated by another body. Although the legislation requires advance notice to the relevant federal or state regulator, the removal of Fed Lite from the regulatory structure will arguably make the Federal Reserve the most important and powerful regulator in the banking industry. This is particularly true in light of the Federal Reserve’s central role in systemic risk regulation discussed above.