By Heath Tarbert and Dimia Fogam
The Office of the Comptroller of the Currency (OCC), the Board of Governors of the Federal Reserve System (FRB), and the Federal Deposit Insurance Corporation (FDIC) (collectively, the Agencies) released for public comment their proposed joint guidance on leveraged lending activities.
The proposed guidance is a revision to the interagency leveraged finance guidance issued in 2001 and would apply to all OCC-, FRB- and FDIC-supervised financial institutions that are substantively engaged in leveraged lending activities—such as those common to the private equity and hedge fund lending market.
Given the immense growth in the volume of leveraged credit as well as the increased participation of non-regulated investors over the last decade, the Agencies have expressed concerns that [click to continue…]
By Sylvia Mayer, Kathlene Burke, and Brian M. Wells
Absent this statutory provision, counterparties to contracts of subsidiaries and affiliates could exercise contractual rights to terminate their agreements based upon the insolvency of the covered financial company. As a result, otherwise viable affiliates of the covered financial company could become insolvent, thereby inciting the collapse of interrelated companies and potentially amplifying ripple effects throughout the economy. Preamble to the Notice of Proposed Rulemaking implementing section 210(c)(16) of the Dodd-Frank Act
Notice of Proposed Rulemaking:
On March 20, 2012, the Federal Deposit Insurance Corporation (“FDIC”) issued its Notice of Proposed Rulemaking (the “Notice”) setting forth the proposed rule (the “Proposed Rule”) to implement section 210(c)(16) of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”), which has been codified as 12 U.S.C. § 5390(c)(16) . Section 210(c)(16) addresses the ability of the FDIC, as receiver, to enforce certain subsidiary and affiliate contracts in a proceeding under the Orderly Liquidation Authority (“OLA”). The OLA, which was created by Title II of the Dodd-Frank Act and is codified, generally, as 11 U.S.C. §§ 5381-94, authorizes the FDIC to take receivership of, and liquidate, a financial company that poses a significant risk to the financial stability of the United States (a “Covered Financial Company”).
The Long Arm of the FDIC Receiver:
In addition to the receiver’s control over the Covered Financial Company itself, section 210(c)(16) prohibits counterparties of a Covered Financial Company’s subsidiaries and affiliates from [click to continue…]
By Heath P. Tarbert and Dimia Fogam
Two federal banking regulators set a new deadline of April 30, 2012 for the comment period for their proposed rules to implement the annual stress test requirements in Section 165 of the Dodd-Frank Act.
Previously, on January 24, 2012, the Office of the Comptroller of the Currency (“OCC”) proposed a rule to implement section 165(i)(2) that would require any national bank or federal thrift with total consolidated assets exceeding $10 billion (“Covered Institutions”) to conduct an annual stress test. A week prior, the Federal Deposit Insurance Corporation (“FDIC”) released its own proposed stress testing rule for FDIC-insured state nonmember banks and thrifts with total consolidated assets of more than $10 billion dollars (“Covered Banks”). The OCC and FDIC proposed rules are “consistent and comparable” as required by Section 165(i)(2), and each direct Covered Institutions and Covered Banks respectively to assess the potential impact of economic conditions on their capital—taking into account their current condition along with corresponding risks, exposures, strategies, and activities. Every year, after being provided with at least three scenarios (including “baseline,” “adverse,” and “severely adverse”) at some point in the Autumn, Covered Institutions and Covered Banks will have until January 5 of the subsequent year to [click to continue…]
Derrick D. Cephas, the head of Weil’s Financial Institutions Regulatory practice, published an interesting article with Bank Director magazine detailing how banks can approach new industry regulations in a constructive manner and how the new rules have changed the regulatory landscape.
Full-Text Article from Bank Director Magazine
Weil’s Marcia L. Goldstein, Heath P. Tarbert, and Kathlene M. Burke authored a column for The New York Law Journal discussing the recently finalized implementing rule in connection with resolution plans, or “living wills,” concluding that the regulations still leave a substantial degree of uncertainty as to what exactly it will take to ensure a plan is “credible.”
Access Full-Text Article from The New York Law Journal (may require subscription)