Financial Stability Oversight Council

By:  Sylvia Mayer and Christopher Linden

The United States in the decades before the crisis allowed a large amount of risk to build up in a variety of institutions outside the formal banking system.  When the storm hit, that put enormous pressure on that system, causing a lot of tension and trauma across financial markets, amplifying the pressure on the formal banking system and adding to the broader damage caused by the economy as a whole.

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By Sylvia Mayer, Kelly DiBlasi, Alex Radetsky, and Kathlene Burke

In April 2011, the Federal Deposit Insurance Corporation (the “FDIC”) published a notice of proposed rulemaking (“Proposed Rule”) to implement the requirements of section 165(d) of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”), which was followed by a three-month period for interested parties to submit their comments to the Proposed Rule.  Following consideration of these comments and modification of the Proposed Rule, on September 13, 2011, the FDIC approved a final rule (the “Final Rule”) implementing section 165(d) of the Dodd-Frank Act.

As summarized in the chart below, the Final Rule departs from the Proposed Rule in several significant ways reflecting careful consideration of the comments submitted:

  PROPOSED RULE FINAL RULE
Timing:
  • Resolution Plans to be submitted within 180 days following effective date of the Final Rule
  • Resolution Plans to be submitted on a staggered timeline with the largest and most complex Covered Companies submitting their plans in July 2012
Scope:
  • One size fits all approach imposing the same requirements on all Covered Companies
  • Tailored or streamlined planning option for less complex Covered Companies
Confidentiality:
  • Confidentiality was not addressed
  •  Covered Companies must designate which portions of the submission are confidential and must include in the public portion an executive summary that includes a high-level description of their resolution strategy
Other Insolvency Proceedings:
  • Resolution Plan to address resolution under the Bankruptcy Code
  • Resolution Plan to address resolution under the Bankruptcy Code for entities eligible to file bankruptcy
  • For material entities (i.e., entity has $50 billion or more in total assets or the entity conducts a critical operation) ineligible to file bankruptcy, Resolution Plan should address resolution under applicable insolvency regime, including strategy and actions that should be taken in the proceeding
Interim Changes:
  • Covered Companies must provide an interim update to the regulators within 45 days of a material change
  • Covered Companies must provide a notice to the regulators within 45 days of a material change
Data Production:
  • Each Covered Company must provide its unconsolidated balance sheet and a consolidating schedule for all entities that are subject to consolidation
  •  Each Covered Company must provide its unconsolidated balance sheet and a consolidating schedule for all material entities that are subject to consolidation
  • The data production requirements have now been keyed to other reporting requirements in the Federal Deposit Insurance Act in order to limit conflicting and distinct information disclosures to the FDIC under various statutory and regulatory requirements
Credit Exposure Reports:
  • Rule to be implemented concurrent with Final Rule on Living Wills
  • Final rule determination deferred to be implemented concurrent with other FRB rulemaking

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by Michael Lyle, Heath Tarbert, and Sunny Thompson

On July 21, 2010, President Obama signed into law the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank” or “the Act”), which was passed in direct response to the global financial crisis.  Just one year later, that Act – representing the most comprehensive package of reforms since the Great Depression – has already begun altering the regulatory landscape for banks, investment funds, securities firms, and publicly listed companies outside the financial sector.  But the most significant changes are yet to come. [click to continue…]

By: Derrick D. Cephas, Heath Tarbert, and Alex Radetsky

On July 27, 2011 the Financial Stability Oversight Council (“FSOC”) issued a final rule (the “Final Rule”) implementing section 804 of the Dodd Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank Act”), which provides the FSOC with the power to designate a financial market utility (“FMU”) as systemically important.  Section 804 specifically permits such a designation if “the failure of or a disruption to the functioning of the FMU could create, or increase, the risk of significant liquidity or credit problems spreading among financial institutions or markets and thereby threaten the stability of the United States financial system.”  The Final Rule discusses the criteria, process, and procedures for the designation of FMUs as systemically important.

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The Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank or the Act) was enacted one year ago. At that time, it was heralded as perhaps the most dramatic set of regulatory reforms since the 1930s. The Act was expected to have significant effects in both the short and long term. Dodd-Frank’s provisions, however, are not confined to the US market. The Act is intended to have significant implications for non-US companies doing business in the United States or whose securities are listed on a US stock exchange. What is more, the Act purports to regulate certain transactions and entities with little direct connection to the United States.