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Tuesday, July 27, 2010

The Dodd-Frank Wall Street Reform and Consumer Protection Act: Titles III and VI, Regulation of Depository Institutions and Depository Institution Holding Companies

M. Maureen Murphy
Legislative Attorney

The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, P.L. 111-203, has as its main purpose financial regulatory reform. Titles III and VI effectuate changes in the regulatory structure governing depository institutions and their holding companies and, thus, constitute a substantial component of the reform effort. Under Title III, there will no longer be a single regulator of federal and state-chartered savings associations, also known as thrifts or savings and loan associations. Title III abolishes the Office of the Thrift Supervision (OTS) and contains extensive provisions respecting the rights of affected employees as well as other administrative matters. It allocates the OTS functions among three existing regulators: the Comptroller of the Currency (OCC) will regulate federally chartered thrifts; the Federal Deposit Insurance Corporation (FDIC), state-chartered thrifts; and the Board of Governors of the Federal Reserve System (FRB), savings and loan holding companies. Title III also makes certain changes to deposit insurance: it makes permanent the increase of deposit insurance coverage to $250,000, and makes that increase retroactive to January 1, 2008. It extends full insurance coverage of noninterest bearing checking accounts for two additional years and authorizes a similar program for credit unions. Included in Title III is also a requirement that the Department of the Treasury and each federal financial regulatory agency establish an office of Minority and Women Inclusion.

Title VI addresses some perceived inadequacies with respect to prudential regulation of depository institutions and their holding companies, including the existence of certain exceptions to the Bank Holding Company Act's (BHC Act's) general prohibition on affiliation of banking institutions and commercial or manufacturing concerns; investment in hedge funds or private equity funds and proprietary trading by banking institutions; gaps in the authority of the FRB to oversee all of the subsidiaries of bank holding companies; the need for greater coordination among the regulators with respect to enforcement actions, charter conversions, and mergers and acquisitions; and elimination of some of the differences affecting the regulation of thrifts and banks, state-chartered and federally chartered institutions, and bank and thrift holding companies.

The full implications of Titles III and VI will not be apparent until the agencies promulgate the many implementing regulations required before many of the provisions go into effect. Generally, the legislation specifies a time period for when a particular rulemaking is to be completed; in some cases, studies are required before the rulemaking may occur.

Date of Report: June 23, 2010
Number of Pages: 23
Order Number: R41339
Price: $29.95

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