Fed Requests Comments on Proposals for Dodd-Frank Law
The Federal Reserve requested comment on proposed rules about “systemically important” companies required by the Dodd-Frank Wall Street Reform and Consumer Protection Act overhauling U.S. financial regulation.
The central bank said in a statement today in Washington that it is requesting comment on two rules. The first determines whether a company is “significantly engaged in financial activities,” and the second defines the terms “significant nonbank financial company” and “significant bank holding company.”
The Dodd-Frank Act, signed into law by President Barack Obama in July, requires the Fed to define terms that the Financial Stability Oversight Council, chaired by the Secretary of the Treasury, will use in determining which companies are “systemically important” and subject to additional regulation.
The law defines a company as “significantly engaged in financial activities” if 85 percent or more of its revenue or assets are related to activities deemed to be financial in nature under the Bank Holding Company Act, the Fed said.
The rule proposes making this determination from a two-year test based on consolidated financial statements.
The central bank, taking a usual step in rule-making, is requesting that comment be submitted by March 30.
The authority of designating a firm as “systemically important” rests with the Financial Stability Oversight Council. One criteria the council may use in designating this status is whether a company is engaged in relationships with other “significant” financial companies.
The proposal defines “significant” as a bank holding company or non-bank financial firm with over $50 billion in total consolidated assets.
The Dodd-Frank legislation already established $50 billion as the threshold at which bank holding companies require additional supervision.
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