Originally published July 29, 2010
The President signed the Dodd-Frank Wall Street Reform and
Consumer Protection Act into law on July 21, 2010. The Act is
not only one of the most sweeping laws affecting the banking and
financial services industries ever to be approved by Congress, but
it is also one of the most restrictive. In general, the Act
provides virtually no new authority to banks or financial services
companies. Instead, the Act imposes layers upon layers of new
regulation and oversight designed to address different causes of
the 2007-2009 crisis in the U.S. financial markets and prevent
their recurrence. For a pdf of Nutter's detailed
Review and Analysis of the Dodd-Frank Wall Street Reform and
Consumer Protection Act,
click here.
SUMMARY
The law is comprised of sixteen broad Titles. Title I
establishes the Financial Stability Oversight Council and requires
it to identify systemically significant "nonbank financial
companies" for heightened regulation by the Federal Reserve,
alongside large bank holding companies. Title I also includes
an amendment offered by Sen. Collins requiring the federal banking
agencies to establish new, and likely higher, minimum leverage and
risk-based capital requirements that will eliminate trust preferred
securities as a permissible component of Tier 1 capital, with
certain exceptions.
Title II creates a process for liquidating distressed, systemically
significant financial companies that is similar to the receivership
process contained in the Federal Deposit Insurance Act. Title
III eliminates the Office of Thrift Supervision and provides for
the transfers of its powers to the Federal Reserve, the Comptroller
of the Currency and the FDIC. Title III also makes changes to
federal deposit insurance coverage, the assessment base, and the
reserve ratio.
Title IV eliminates the private adviser exemption under the
Investment Advisers Act of 1940, provides for the regulation of
advisers to hedge funds and other funds, and imposes related
requirements. Title V establishes the Federal Insurance
Office within the Department of the Treasury and defines its powers
and responsibilities.
Title VI makes various changes in the ways depository institutions
and depository institution holding companies are regulated.
Among other things, Title VI expands the scope of insider
transaction rules and per-borrower lending limits, imposes new
limits on proprietary trading in securities (the so-called
"Volcker Rule"), imposes new restrictions on thrifts that
do not satisfy the qualified thrift lender test, and changes the
rules on dividend waivers by mutual holding companies that have
partially converted to stock.
Title VII establishes a regulatory and reporting framework for the
over-the-counter and security-based swap markets. Title VII
requires the registration of swap dealers and major participants,
requires that certain swap contracts be cleared and
exchange-traded, and imposes other related requirements.
Title VIII establishes a new framework for the regulation of
payment, clearing and settlement activities. Among other
things, Title VIII requires the establishment of uniform
risk-management standards for systemically important payment,
clearing, and settlement activities and the institutions that
manage or operate systems in which activities of that kind are
carried out.
Title IX seeks to better protect investors in securities.
Among other provisions, Title IX grants the SEC authority to hold
brokers and dealers providing investment advice to the same
standards that investment advisers are held to, establishes an
Office of Credit Ratings within the SEC to ensure that ratings are
not unduly influenced by conflicts of interest, requires firms that
package loans or securities and sell units in them to retain an
ownership interest, imposes new executive compensation
requirements, and requires registration of advisors to
municipalities.
Title X establishes the Bureau of Consumer Financial Protection as
an independent bureau in the Federal Reserve System to regulate the
offering of consumer financial products and services, makes it
harder for courts and the Comptroller of the Currency to determine
that state laws protecting consumers in financial matters are
preempted by federal laws that apply to national banks and federal
savings banks and, among other provisions, authorizes the
regulation of interchange fees and makes it harder for payment
networks to dictate terms to merchants.
Title XI restricts the Federal Reserve's ability to provide
emergency financial assistance in the future. Among other
provisions, Title XI requires the Federal Reserve to establish
policies and procedures governing its emergency lending authority
to ensure that any emergency lending program in the future does not
aid a particular failing financial company, protects taxpayers from
losses, and is ended in a timely fashion. Title XI also
requires the Federal Reserve to report, in detail, on its website,
all financial assistance provided from December 1, 2007 to July 21,
2010.
Title XII is intended to improve access to mainstream financial
institutions. Title XIII reduces the maximum amount available
under the Emergency Economic Stabilization Act of 2008, and
provides, among other things, that no authority under the Emergency
Economic Stabilization Act may be used to incur any obligations
under any new programs.
Title XIV imposes new requirements on mortgage lenders including,
among others, a prohibition on certain financial incentives that
would encourage a mortgage originator to steer a consumer to a
higher-cost mortgage, and a prohibition on making a residential
mortgage loan unless a determination is made that the borrower has
a reasonable ability to repay the loan. The rules apply to
depository institutions and other mortgage lenders.
Title XV imposes miscellaneous requirements. Among other
provisions, the Government Accountability Office is required to
issue a report assessing the relative independence, effectiveness,
and expertise of presidentially appointed inspectors general and
inspectors general of designated federal entities. Title XVI
Act amends Section 1256 of the Internal Revenue Code.
For a pdf of Nutter's detailed Review and Analysis of the
Dodd-Frank Wall Street Reform and Consumer Protection Act,
click here.
Nutter Bank Report
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