SRC Insights: Second Quarter 2012

DFA Today - The Dodd-Frank Act: Progress, Priorities, and Challenges

by Bob Rell, Senior Specialist

As the Dodd-Frank Act (DFA or the act) rapidly approaches its second anniversary, it's a time to reflect back on the numerous accomplishments to date, the sizable tasks that remain, and the impact that continues to unfold. The act represents a sea of change in bank regulation. It aims to strengthen the resilience of the financial system, without unduly constraining credit or deterring financial innovation. Spirited arguments between critics and proponents are still heard daily. History will be the ultimate judge of the effectiveness of the DFA.

This recurring feature of SRC Insights highlights key events associated with the DFA that have transpired since the last issue. Reference links to more detailed information on the subject matter are also provided. If you have any questions regarding this periodic section, please contact Senior Specialist Bob Rell.

RULE PROPOSALS AND REQUESTS FOR COMMENT

April 20, 2012
Federal Reserve Board Announces the Formation of the Model Validation Council External Link

The Federal Reserve Board announced the formation of the Model Validation Council, which will provide the Federal Reserve with expert and independent advice on its process to rigorously assess the models used in stress tests of banking institutions. In addition, the Federal Reserve announced it will host a two-day symposium to discuss best practices in stress testing.

April 19, 2012
Volcker Rule Conformance Period Clarified External Link

The Federal Reserve Board (the Board) announced its approval of a statement clarifying that an entity covered by section 619 of the DFA, or the so-called Volcker Rule, has the full two-year period provided by the statute to fully conform its activities and investments, unless the Board extends the conformance period.

April 2, 2012
Federal Reserve Seeks Comment on Proposed Rulemaking to Establish Requirements for Determining Whether a Company Is Predominantly Engaged in Financial Activities External Link

The Board requested comment on a proposed amendment to its Notice of Proposed Rulemaking (NPR) issued February 11, 2011, to establish requirements for determining whether a company is “predominantly engaged in financial activities.”

March 30, 2012
Agencies Clarify Effective Date for Section 716 of the DFA External Link

Three federal financial regulatory agencies issued guidance clarifying that the effective date of section 716, the so-called Swaps Pushout provision, of the DFA is July 16, 2013. Section 716 prohibits certain types of federal assistance, such as discount window lending and deposit insurance, for certain uses to a swaps entity, subject to specified exceptions, with respect to its swap, security-based swap, or other activity.

March 27, 2012
Federal Deposit Insurance Corporation (FDIC)—Proposed Rule Amending the Definitions Used to Determine Assessment Rates for Large, Complex Institutions External Link

The FDIC proposes to amend its regulations to revise some of the definitions used to determine assessment rates for large and highly complex insured depository institutions. The FDIC believes that the proposed amendments would result in more consistent reporting, better reflect risk to the FDIC, significantly reduce reporting burden, and satisfy many of the concerns voiced by the industry after adoption of the final rule published in the Federal Register on February 25, 2011 (76 FR 10672).