Policy

Dodd Frank's Long Regulatory Road Ahead


by Kelli McMorrow

The Dodd-Frank Act Wall Street Reform Act required some 400 new rules, and currently only an estimated 50 percent of those rules have been enacted.

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Against this backdrop representatives from multiple regulatory agencies, including the Federal Reserve, Federal Deposit Insurance Corporation (FDIC), Office of the Comptroller of the Currency (OCC), Consumer Financial Protection Bureau (CFPB), Commodity Futures Trading Commission (CFTC) and the Securities and Exchange Commission (SEC) testified before the Senate Committee on Banking, Housing, and Urban Affairs last week

The hearing was centered on the various measures taken by the agencies as required by the Dodd-Frank Act since its passage in 2010. About a quarter of Dodd Frank’s remaining rules are in the process of being enacted and the other 25 percent have yet to be addressed. The majority of the testimony focused, not on the 200 rules already enacted, but on those remaining to be implemented.

Committee Chairman Tim Johnson (D-SD) inquired as to what rules each agency would have in place by the end of the year. Governor Tarullo of the Federal Reserve said he expected that the Financial Sector Concentration rule will be finalized and that the Risk Retention rule would not be complete, but that they are “in the home stretch.”

Both Chairman Gruenberg of the FDIC and Comptroller Curry of the OCC were more optimistic than Governor Tarullo, and said they hoped to have their provisions of the Risk Retention rule completed by the end of the year.

And while the CFPB is not directly involved in planning the Risk Retention rule, Director Cordray did express “an interest in it,” in addition to finalizing the Home Mortgage Disclosure Act.

SEC Chair White indicated that the SEC will focus onTitle VII, Derivatives ,and on the executive compensation rules. The SEC’s is working with other regulatory agencies to finalize the Risk Retention rule.

Chairman Massad said that that CFTCis focusing on special entity rules that address smaller end-user concerns. Otherwise, most of the CFTC rulemaking tasks are complete, allowing the agency to review and tweak them before finalization.

A core issue that Senators and regulators alike wanted to address isthe need to make sure exceptions were in place for small to mid-size banks while putting regulatory pressure on the largest, systemically important financial institutions (SIFIs). Governor Tarullo voiced the Federal Reserve’s support in exempting community banks from provisions such as the Volcker rule and the incentive compensation requirement. He also suggested that it is time to raise the 50 billion dollar threshold on what is considered a SIFI bank.

Senator Heitkamp (D-ND) was also concerned about smaller banks, remarking, “Too big to fail, has become, for many of these community banks, too small to succeed.”

Large banks came under fire for the duration of the hearing, with many regulators explaining how their agencies have strengthened standards for such institutions. Capital surcharges, liquidity coverage ratios, and standards for the bank’s “living wills” are all being raised, according to their testimony.

To ensure that progress is being made on Wall Street reform, Senator Warren (D-MA) asked, “So we’re not going to be back here a year from now, having the same conversation again?” Both Governor Tarullo and Chairman Gruenberg assured her that the Federal Reserve and FDIC expect significant changes from the largest SIFI banks by next year.