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House Oversight and Investigations Subcommittee Explores Dodd-Frank’s “Too Big to Fail” Designation Process
On March 28, the House Oversight and Investigations Subcommittee held a hearing that examined the processes used by the Financial Stability Oversight Council to designate nonbank financial companies under Section 113 of Dodd-Frank. As discussed in a memorandum issued prior to the hearing by the House Financial Services Committee, the hearing was also scheduled to go over the findings of a recent Financial Services Committee Staff Report, including concerns over whether FSOC has acted inconsistently in exercising its power to designate certain nonbank companies as “too big to fail.” During the hearing, the subcommittee heard from the following witnesses:
- Dr. Douglas Holtz-Eakin, President, American Action Forum
- Dr. Paul Kupiec, Resident Scholar, American Enterprise Institute
- Professor David Zaring, Associate Professor, Legal Studies and Business Ethics, The Wharton School, University of Pennsylvania
- Mr. Alex J. Pollock, Distinguished Senior Fellow, R Street Institute
In a press release available on the Financial Services Committee webpage following the hearing, the majority members of the subcommittee identified the “Key Takeaways from the Hearing,” as: (i) “[t]he Dodd-Frank Act created an arbitrary threshold that the FSOC uses to designate systemically important financial institutions (SIFIs); (ii) “FSOC’s process for designating SIFIs in essence codifies "too big to fail" and poses a threat to the U.S. economy”; (iii) “[t]he Financial CHOICE Act, the Republican plan to replace Dodd-Frank and promote economic growth” would “end ‘too big to fail’ and bank bailouts.”
On November 21, the Financial Stability Board, in consultation with the Basel Committee on Banking Supervision and national authorities, released its updated 2016 list of G-SIBs and 2016 list of G-SIIs. Each of the new 2016 lists comprise the same banks/insurers as those on their respective 2015 list. The Basel Committee also released the following additional information related to its 2016 G-SIB assessment: (i) a list of all the banks in the assessment sample; (ii) the denominators of each indicator used to calculate the banks' scores; (iii) the cutoff score that was used to identify the G-SIBs in the updated list; (iv) the thresholds used to allocate G-SIBs to buckets for the purpose of calculating the specific higher loss absorbency requirements; and (v) links to disclosures of all banks in the assessment sample.
On November 10, the Financial Stability Board issued policy proposals in response to G20 Leaders’ request at the 2013 St. Petersburg Summit to develop proposals by the end of 2014. The proposals consist of “a set of principles and a detailed term sheet on the adequacy of loss-absorbing and recapitalization capacity of global systemically important banks (G-SIBs).” The proposals will establish a new minimum standard for total loss-absorbing capacity (TLAC). The new TLAC standard should (i) ensure home and host authorities that G-SIBs have adequate capacity to absorb losses; (ii) allow resolution authorities “to implement a resolution strategy that minimi[zes] any impact on financial stability and ensures the continuity of critical economic functions;” and (iii) help achieve an equal playing field internationally. Comments and responses to the proposals are due by February 2, 2015.
- Daniel R. Alonso to discuss internal investigations at the Institute of Internal Auditors of Argentina Spanish-language webinar
- Jonice Gray Tucker to discuss “Fintech trends” at the BIHC Network Elevating Black Excellence Regional Summit
- Jeffrey P. Naimon to discuss "Truth in lending” at the American Bar Association National Institute on Consumer Financial Services Basics
- Daniel R. Alonso to discuss anti-money-laundering at FELABAN Spanish-language webinar “Perspective for banks: LAFT, FINCEN, OFAC, Cryptocurrency”
- Daniel R. Alonso to discuss "What’s new in BSA/AML compliance?" at the Institute of International Bankers Regulatory Compliance Seminar
- Marshall T. Bell and John R. Coleman to speak at 2021 AFSA Annual Meeting
- Jon David D. Langlois to discuss "Regulatory update: What you need to know under the new boss; It won’t be the same as the old boss" at the IMN Residential Mortgage Service Rights Forum (East)
- Benjamin B. Klubes to discuss “Creating a Fantastic Workplace Culture”
- John R. Coleman and Amanda R. Lawrence to discuss “Consumer financial services government enforcement actions – The CFPB and beyond” at the Government Investigations & Civil Litigation Institute Annual Meeting
- Jonice Gray Tucker to discuss "Consumer financial services" at the Practising Law Institute Banking Law Institute
- Jonice Gray Tucker to discuss “Regulators always ring twice: Responding to a government request” at ALM Legalweek