Dodd-Frank News Center

Fed Considering Impact of Basel III Rules on Insurance Sector

By Sarah xorchersen-Keto, Washington News Bureau, Contributing Author, the Federal Banking Law Reporter and Bank Digest.

Federal Reserve Board Chairman Ben S. Bernanke said the Fed is discussing the feasibility of a quantitative impact study to examine the impact of proposed Basel III capital standards rules on the insurance sector. During questioning at the Feb. 27, 2013, the semiannual hearing on monetary policy before the House Financial Services Committee (webcast), Bernanke said “we recognize that there are important differences between banks and insurance companies...we have also heard from Congress about this insurance banking distinction, and we're looking at it very seriously.” Bernanke added that the Fed has been consulting with state insurance regulators, the federal insurance office, the insurance industry and many other stakeholders “to make sure we understand these issues.” Bernanke acknowledged that the Fed wants to get the rules out as quickly as possible, but “we need to make sure that they're appropriately set for the insurance business model, and that will take some time to study and understand.”

Warren Urges Support for CFPB Confirmation; Cordray Calls for Continued Lending

By Sarah Borchersen-Keto, Washington News Bureau, Contributing Author, the Federal Banking Law Reporter and Bank Digest.

Sen. Elizabeth Warren, D-Mass., urged credit unions to “use your clout” and convince Congress that it is time to “move on, time to stop re-litigating settled decisions,” and confirm Richard Cordray as director of the Consumer Financial Protection Bureau. In Feb. 27, 2013, remarks to the Credit Union National Association, Warren stressed that two years after Cordray's initial nomination, the need to get things settled has become greater than ever. Warren emphasized that without the CFPB, “we are back to automatic default Dodd-Frank rules” that, unlike the qualified mortgage rules, “lack the exemptions for small financial institutions.” Warren told the CUNA that “never before in American history has a minority in the Senate blocked a nominee to try to get changes in a law they don't like and don't have the votes to change.”

Bernanke Says “Moving in the Right Direction” on Too-Big-to-Fail

By Richard Roth, J.D., Editor, the Federal Banking Law Reporter, Bank Compliance Guide, Bank Digest; co-author, Dodd-Frank Wall Street Reform and Consumer Protection Act—Law, Explanation and Analysis and Sarah Borchersen-Keto, Washington News Bureau, Contributing Author, the Federal Banking Law Reporter and Bank Digest.

Fed Chairman Ben Bernanke said the plan to end the belief that some banks are too big to fail is “moving in the right direction.” He predicted that over time there will be increased market expectations that certain large institutions can fail during questioning at a Senate Banking Committee hearing Feb. 26, 2013 (webcast), when he gave his semiannual report on monetary policy. Bernanke noted that progress had been made on the Federal Deposit Insurance Corp.'s orderly liquidation authority and on living wills. “If additional steps are needed, then Congress obviously can discuss those,” Bernanke told Sen. Elizabeth Warren, D-Mass. He added that the benefits associated with large banks are going to decline over time, meaning that “some banks are going to voluntarily begin to reduce their size because they're not getting the benefit that they used to get.”

Cordray Urges Collaboration; OCC Prepared to Litigate

By Sarah Borchersen-Keto, Washington News Bureau, Contributing Author, the Federal Banking Law Reporter and Bank Digest.

CFPB Director Richard Cordray called for collaboration with state attorneys general on the most pressing consumer financial issues, such as deceptive practices, debt traps and discrimination. In a Feb. 26, 2013, speech to the National Association of Attorneys General, Cordray said the CFPB is committed to educating consumers and providing them with trustworthy information to make responsible decisions. “We are glad to team up with you in joint efforts to achieve these goals,” Cordray said. He noted that many areas of focus for the CFPB are areas in which state attorneys general have already laid the groundwork. NAAG working groups on topics such as student loans and auto loan financing “have fostered important conversations and allowed for closer and more effective coordination,” Cordray said.

Financial Services Committee Says CFPB Budget Proposal “Excessive”

By Sarah Borchersen-Keto, Washington News Bureau, Contributing Author, the Federal Banking Law Reporter and Bank Digest.

The Financial Services Committee said the administration's fiscal year 2013 budget request of $448 million to fund the Consumer Financial Protection Bureau is “excessive” and that it intends to examine whether CFPB funding should be subject to the Congressional appropriations process to promote greater accountability and transparency. The committee's position was presented at a Feb. 26, 2013, hearing to adopt its budget views and estimates for the 113th Congress.

Federal Housing Finance Policy Examined

This story appeared in Bank Digest.

The Bipartisan Policy Center has issued a report examining issues it has determined to be essential to a resilient housing system. According to the report, these include:

• a responsible, sustainable approach to homeownership that will help ensure that all creditworthy households have access to homeownership;
• a reformed system of housing finance in which the private sector plays a far more prominent role in bearing credit risk while promoting a greater diversity of funding sources for mortgage financing;
• a more targeted approach to providing rental assistance that directs scarce resources to the lowest-income renters while insisting on a high level of performance by housing providers; and
• a more comprehensive focus on meeting the housing needs of seniors.

Sen. Bob Corker, R-Tenn., a member of the Banking, Housing and Urban Affairs Committee, commended the proposal for focusing on putting "substantial private capital in front of the government" and "resolving the legal limbo" of government-sponsored enterprises Fannie Mae and Freddie Mac, which own or guarantee roughly half of all U.S. mortgages at a total value of more than $5 trillion. Corker stressed that since Fannie and Freddie were taken into government conservatorship in 2008 they have cost taxpayers $137 billion.

Tarullo Urges Completion of International Non-Bank SIFI Designation

By Sarah Borchersen-Keto, Washington News Bureau, Contributing Author, the Federal Banking Law Reporter and Bank Digest.

Federal Reserve Board Governor Daniel Tarullo called for work on an international designation of non-bank systemically important financial institutions, such as insurance companies, to be completed over the next six months. He also expressed confidence that a capital surcharge proposal for systemically important international banking organizations, under consideration by the Basel Committee, would be completed over the next year. Speaking Feb. 22, 2013, to the Cornell International Law Journal Symposium, Tarullo again raised concerns over the shadow banking system and the vulnerabilities associated with wholesale short-term funding. He emphasized that these vulnerabilities involve both large, prudentially regulated institutions and the broader financial system. “The liability side of the balance sheets of financial firms has barely been addressed in the reform agenda. Yet here is where the systemic problems of interconnectedness and contagion are most apparent,” he warned.

Comment Period Extended on Prudential Standards Proposal

This story appeared in Bank Digest.

The Federal Reserve Board has extended until April 30, 2013, the comment period on a proposed rule to implement the enhanced prudential standards and early remediation requirements established under Sections 165 and 166 of the Dodd-Frank Act for foreign banking organizations and foreign nonbank financial companies supervised by the Fed. The enhanced prudential standards include risk-based capital and leverage requirements, liquidity standards, risk management and risk committee requirements, single-counterparty credit limits and stress test requirements. According to the Fed, the comment period is being extended to allow interested persons more time to analyze the issues and prepare their comments.

CFPB Seeking Information on Private Student Loans

This story appeared in Bank Digest.

The CFPB is publishing a notice and request for information to determine options that would increase the availability of affordable payment plans for borrowers with existing private student loans. The bureau hopes to identify opportunities to spur refinance and modification activity in the private student loan market. The notice seeks information from market participants, consumers and other stakeholders in order to provide more detailed information on ways to encourage the development of more affordable loan repayment mechanisms for private student loan borrowers.

Comment Period Extended for Prudential Standards Rules

The Federal Reserve Board has extended until April 30, 2013, the comment period on a proposed rule to implement the enhanced prudential standards and early remediation requirements established under Sections 165 and 166 of the Dodd-Frank Wall Act for foreign banking organizations and foreign nonbank financial companies supervised by the Fed. The enhanced prudential standards include risk-based capital and leverage requirements, liquidity standards, risk management and risk committee requirements, single-counterparty credit limits, and stress test requirements.

The Fed extended the comment period to allow interested persons more time to analyze the issues and prepare their comments. Originally, comments were due by March 31, 2013.