Dodd-Frank News Center

GAO Reports on the Supervisory Capital Assessment Program

 This story appeared in Bank Digest.

The Supervisory Capital Assessment Program (SCAP) was established under the Capital Assistance Program (CAP)—a component of the Troubled Asset Relief Program (TARP)—to assess whether the 19 largest U.S. bank holding companies (BHC) had enough capital to withstand a severe economic downturn. Led by the Federal Reserve Board, federal bank regulators conducted a stress test to determine if these banks needed to raise additional capital, either privately or through CAP. The GAO has issued a report to: 1. describe the SCAP process and participants’ views of the process; 2. assess SCAP’s goals and results and BHCs’ performance; and3. identify how regulators and the BHCs are applying lessons learned from SCAP.

Bernanke Sees Regulatory Harmony Ahead of FSOC Meeting

By Sarah Borchersen-Keto, CCH Washington News Bureau, Contributing Author, the CCH Federal Banking Law Reporter, Sept. 30, 2010.

On the eve of the first meeting of the Financial Stability Oversight Council (FSOC), Federal Reserve Board Chairman Ben Bernanke said he does not see “any deep or principled controversies” amongst regulators at this point.

Bernanke, appearing before the Senate Banking Committee Sept. 30, 2010, acknowledged that there will be pressure on regulators arising from the fact that there is “so much to do so quickly.” However, he said he does not anticipate conflicts that would threaten the implementation of the Dodd-Frank Wall Street Reform and Consumer Protection Act.

SEC Issues Guidance on Presentation of Liquidity and Capital Resources Disclosures in MD&A

This story appeared in SEC Today.

The SEC recently released interpretive guidance that is intended to improve the discussion of liquidity and capital resources in a company’s Management’s Discussion and Analysis (“MD&A”) in order to help investors understand the liquidity and funding risks facing the company. Commission Chair Mary Schapiro noted that the SEC has long advised that disclosure about liquidity and capital resources is critical to assessing a company's prospects for the future, and even the likelihood of its survival. This principle was borne out during the recent financial crisis, when many business failures were the direct result of liquidity constraints, she said.

Community Bankers Urge FDIC to Implement New Assessment Base Quickly

This story appeared in Bank Digest.

The Independent Community Bankers Association has sent a a letter to the Federal Deposit Insurance Corp. Chairman Sheila Bair urging the agency to quickly amend its regulations to redefine the term “assessment base” with respect to an insured depository institution as required by the Dodd-Frank Wall Street Reform and Consumer Protection Act. The ICBA expects that the resulting calculation of the amended assessment base will save community banks over $4 billion in total assessments during the first three years of its implementation. The ICBA would like the regulatory change to be made retroactive to the effective date of the Dodd-Frank Act, which was July 21, 2010. Because the regulatory change is expected to result in lower assessments, the organization further urges the FDIC to return all unused prepaid assessments prior to June 30, 2013.

National Banks Must Register as Municipal Securities Advisors

This story appeared in Bank Digest.

The OCC has warned national banks that they must register with the SEC by Oct. 1, 2010, if they are municipal securities advisors. Under an SEC interim rule, a “municipal securities advisor” is a person who is not a municipal entity or an employee of a municipal entity, who provides advice to or on behalf of a municipal entity or an obligated person thereof, regarding municipal financial products or the issuance of municipal securities, including advice concerning the structure, timing, terms and other similar matters. Persons who solicit municipal entities or obligated persons on behalf of certain third parties to obtain or retain a business engagement involving municipal financial products, the issuance of municipal securities, or investment advisory services also are covered by the rule. However, municipal securities dealers serving as underwriters, attorneys offering legal advice or providing services that are of a traditional nature, or engineers providing engineering advice are not covered.

FDIC Propopes Temporary Unlimited Coverage for Noninterest-Bearing Transaction Accounts

This story appeared in Bank Digest.

The Federal Deposit Insurance Corp . has issued a proposed rule to implement the section 343 of the Dodd-Frank Wall Street Reform and Consumer Protection Act that provides temporary unlimited coverage for noninterest-bearing transaction accounts. The separate coverage for noninterest-bearing transaction accounts becomes effective on Dec. 31, 2010, and terminates on Dec. 31, 2012. The agency also has said it does not plan to extend the Transaction Account Guarantee Program (TAGP) beyond its scheduled Dec. 31, 2010, ending date. The TAGP is similar to the extended coverage provided by the Dodd-Frank Act; however, the Dodd-Frank Act coverage does not include either low-interest NOW accounts or Interest on Lawyer Trust Accounts. Comments are due on the proposed rule by Oct. 15, 2010.

Summary of Staff Meeting with Industry Representatives Released

This story appeared in Bank Digest.

The Federal Reserve Board has released a summary of meetings between its staff and industry representatives

Bank of America—Parties discussed securitization risk retention requirements under Section 941 of the Dodd-Frank Act.

UBS—Parties discussed provisions of Title VII and Section 619 (Volcker Rule)

Bank of America—Parties discussed the interchange fee provisions of the Dodd-Frank Act.

Craig Wildfang and Paul Snyder—Fed staff and staff of the Federal Reserve Bank of Philadelphia met with Messrs. Wildfang and Snyder to discuss certain challenges they expected the Fed to face during the rulemaking process to implement the interchange fee provisions of the Dodd-Frank Act.

Wells Fargo—Parties discussed the interchange fee provisions of the Dodd- Frank Act.

Electronic Transactions Association—Parties discussed the interchange fee provisions of the Dodd- Frank Act.

European Parliament Approves Legislation Creating New EU-Wide Financial Regulatory Regime

By James Hamilton, J.D., LL.M., Principal Analyst, CCH Federal Securities Law Reporter; and CCH Derivatives Regulation Law Reporter.

The European Parliament has approved legislation creating a European financial regulatory framework with separate regulators for securities, banking and insurance, as well as a European Systemic Risk Board similar to the Financial Stability Oversight Council created by the Dodd-Frank Wall Street Reform and Consumer Protection Act. The new regulatory framework should be fully operational by January 1, 2011. Praising the new regulatory regime, EU Commissioner for the Internal Market Michel Barnier said that the new regime will give the EU monitoring tools to detect risk which is accumulating across the financial system and provide effective tools to act. The new framework gives the EU the ``control tower and the radar screens’’ needed to identify risks, he said, and the tools to better control financial players, as well as the means to act quickly in a coordinated and timely fashion.

FDIC Delays Action on Dismantling Systemically Risky Firms

By Sarah Borchersen-Keto, CCH Washington News Bureau, Contributing Author, the CCH Federal Banking Law Reporter, Sept. 27, 2010.

The Federal Deposit Insurance Corporation has opted to delay voting on an initial rule that would have begun to outline how the government plans to implement a provision within the Dodd-Frank Wall Street Reform and Consumer Protection Act relating to the dismantling of large, systemically-important firms.

The delay will allow for consultation with the new Financial Stability Oversight Council, and a vote on the initial rule is expected over the short term.

Bernanke Discusses Implications of the Financial Crisis for Economics

This story appeared in Bank Digest.

In a speech before a conference co-sponsored by the Center for Economic Policy Studies and the Bendheim Center for Finance, Princeton University, Princeton, N.J., Federal Reserve Board Chairman Ben S. Bernanke argued that “the recent financial crisis was more a failure of economic engineering and economic management than of what I have called economic science.” He noted that the economic engineering problems were reflected in a number of structural weaknesses in our financial system.