This regular publication from DLA Piper focuses on helping banking and financial services clients navigate the ever-changing federal regulatory landscape.

  • Fed's supervision chief discusses intent to improve effectiveness of post-crisis regulation. Speaking before an American Bar Association conference on January 19, the Federal Reserve's Vice Chairman for Supervision Randal Quarles recognized that post-crisis regulation has significantly enhanced the stability of the financial system, but said that regulation now needs to be tailored for better efficiency, transparency and simplicity. While Quarles feels the Fed has made progress in tailoring its regulation and supervision of small, medium, and large firms, he called for more tailoring of regulations for larger banks that are not Global Systemically Important Banks (G-SIBs). In particular, he called for gradation of liquidity requirements for large banks that are not G-SIBs, revisiting the advanced approaches thresholds that identify internationally active banks, and simplification of loss absorbing requirements. Quarles was careful to note that "while I am advocating a simplification of large-bank loss-absorbency requirements, I am not advocating an enervation of the regulatory capital regime." Quarles also said that leverage ratio recalibration is one of the Fed's highest priorities, followed by further improving the transparency of the Fed's annual stress test, reducing the regulatory burdens of resolution planning and streamlining the Volcker rule. See the full text of his speech.
  • Fed Board invites comment on risk management guidance for Large Financial Institutions. The Federal Reserve Board of Governors on January 4 unveiled proposed supervisory guidance for financial institutions with at least $50 billion in consolidated assets. Providing core principles for senior management, the management of specific business lines and independent risk assessment, it would apply to bank holding companies, savings and loan holding companies, foreign banks operating in the US and non-bank financial companies designated by the Financial Stability Oversight Council for supervision by the Board. This latest proposed guidance is part of a broader Fed initiative to develop a new rating system for large financial institutions (LFIs) under the post-2008 financial crisis supervisory program. Comments on the proposed guidance will be accepted until March 15.
  • Will Congress do banking regulatory reform? Among the items competing for Congressional attention in this election year is bipartisan Senate legislation to overhaul the nation's banking regulatory system for the first time since passage of Dodd-Frank in 2010. The Banking Committee in December advanced the Economic Growth, Regulatory Relief and Consumer Protection Act to the full Senate. The legislation would modernize regulations to benefit smaller financial institutions, such as credit unions, community banks, midsize banks, smaller regional banks and custody banks, while enhancing consumer protections for veterans, senior citizens and victims of fraud. One of its key provisions would change the designation of Systemically Important Financial Institutions (SIFIs) with assets of $250 billion and less, from the current Dodd-Frank $50 billion threshold. The Senate bill is less sweeping than the Financial Choice Act, passed by the House of Representatives on a near-party-line vote, which would repeal major provisions of Dodd-Frank.
  • Proposals to amend the Federal Reserve Act. Highlighting reforms being contemplated on Capitol Hill to improve transparency and accountability, seven legislative proposals to overhaul operations at the Fed's Board of Governors and its other bodies were discussed at a January 10 hearing of a House Financial Services subcommittee. The panel heard testimony from four policy think tanks, with those from the right generally expressing support for the legislation as a means of enhancing accountability at the Fed, while the sole left-leaning witness expressed concern that some of the proposals could put more control of the Fed in the hands of the banking industry. One of the draft bills would make the Federal Open Market Committee officially responsible for setting the interest rate paid on banks' excess reserve balances. Another would bring the non-monetary policy functions of the Fed system into the annual Congressional appropriations process.