Fed Seeks More Transparency in Systemically Important Designations

By Sarah Borchersen-Keto, CCH Washington News Bureau, Contributing Author, the CCH Federal Banking Law Reporter, May 12, 2011.

Federal Reserve Board Chairman Ben Bernanke told Congress that “more details are necessary” in terms of how the Financial Stability Oversight Council will designate non-bank financial firms as systemically important to the economy.

Appearing May 12, 2011, before the Senate Banking Committee, Bernanke said he favored “providing more information to the public and getting robust input and comment…we should get all the input we can from the public on this process.”

He added that while more information can be provided in terms of metrics and criteria, “I don’t think that we can provide an exact formula that will apply mechanically without an application of judgment. I think ultimately we’re going to have to look at a whole variety of issues, which cannot always be put into a numerical metric.”

Deputy Treasury Secretary Neal Wolin noted that as further clarification is provided on how the process will unfold, “we will want to make sure we provide adequate opportunity for people to react.”

Federal Deposit Insurance Corporation Chairman Sheila Bair said she supported “going out for comment again with more detailed metrics,” adding, “I don’t think we can provide complete bright lines. There will need to be some area for judgment.”

Regulators appearing before the committee also stressed that there was no alternative but to move forward with implementation of the Dodd-Frank Act, despite Republican efforts to slow it down.

“The idea that taxpayers would continue to be on the hook in these moments of stress is one that is unacceptable,” said Wolin. Bernanke noted that it was “painfully clear” that the regulatory system had been insufficient during the financial crisis. He praised Dodd-Frank for encouraging a macroprudential approach to regulation, which is being adopted globally. Bair added that repeal of Dodd-Frank would be “very harmful.”

Bernanke, reiterated concerns about the effectiveness of the small bank exemption under the Durbin debit interchange amendment. “We’re still not sure  whether it will work…there are market forces that would work against the exemption,” the Fed chairman said. He added that there was “good reason” to be concerned about the impact of the amendment on smaller banks. Bair added that the amendment will reduce revenues at a number of smaller banks, which will result in higher fees, primarily for transaction accounts.

Product Spotlight

Bankruptcy Law Guide    New bankruptcy legislative requirements and changing economic conditions have drastically increased the amount of information required to handle this costly and uncertain area of law. The Bankruptcy Law Reporter provides all the most up-to-date information necessary to navigate the maze of bankruptcy law. Whether it's simply ensuring your company is on solid legal and financial ground, settling court disputes or protecting your own personal interests in a corporate or personal case, the answers are all here.   More Info...

Bank Digest Bank Digest tracks the latest banking activity, regulatory changes and trends in federal banking policy. Each day, Bank Digest provides both a concise abstract and the full text of that day's releases from the federal agencies that impact the banking industry. Bank Digest also provides additional detail of significant events in weekly and monthly features.   More Info...

Consumer Credit Guide In the past, many states have attempted to cure problems and abuses that have appeared on a "one-at-a-time" basis, resulting in a multiplicity of consumer credit laws. In addition, the federal government has injected standards into broad areas of consumer credit previously regulated only by the states. The CCH Consumer Credit Guide publishes the information that you need to succeed in the complex area of state and federal consumer credit laws and regulations.   More Info...

Financial Privacy Law Guide This product provides comprehensive coverage of federal and state laws, regulations, interpretations and decisions. The Guide covers data security, insurance and health information privacy, fair credit reporting, bank secrecy, identity theft, the Gramm-Leach-Bliley Act, the E-Sign Act, the Electronic Fund Transfer Act, the Freedom of Information Act, the Right to Financial Privacy Act and international privacy. More Info...

State Banking Law Reporter Expedite your research with the CCH© State Banking Law Reporter. Now there's a single source for state banking law, giving banking professionals and legal counsel ready access to the information you need. State Banking Law Reporter combines the full text of state laws and regulations with authoritative explanations and consistent, topical organization.   More Info...