On May 8th, the Federal Reserve Board published for comment a proposed rule that would implement section 622 of the Dodd-Frank Act, which prohibits a financial company from combining with another company if the ratio of the resulting financial company’s liabilities exceeds 10 percent of the aggregate consolidated liabilities of all financial companies. Financial companies subject to the concentration limit would include insured depository institutions, bank holding companies, savings and loan holding companies, foreign banking organizations, companies that control insured depository institutions, and nonbank financial companies designated by the Financial Stability Oversight Council for Board supervision. Comments should be submitted on or before July 8, 2014. Federal Reserve Board Press Release.
Fed Chair Eyeing Non-Bank Financial Firms
On May 8th, the Wall Street Journal summarized the Senate testimony of Janet Yellen, Chair of the Federal Reserve Board. Addressing the possible designation of non-bank financial institutions as systemically important, Yellen acknowledged that such firms have characteristics different from those of banks. But, she added, if a firm poses a threat to the financial system it should be subjected to risk standards and possibly to capital and liquidity standards as well. Yellen Comments.
Fed Governor Rethinks Prudential Regulation
On May 8th, Federal Reserve Board Governor Daniel K. Tarullo discussed prudential regulation, calling for a regulatory approach which considers the size, scope, and range of activities of the regulated entities. Tarullo Remarks.