- Feb 22, 2008
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I work for a bank and on the front page of our intraweb there was a write up of the changes. Seeing how this is the biggest change since the Great Depression thought it would be interesting to post here.
"Congress has approved the biggest overhaul of financial industry regulations since the Great Depression, and President Obama soon will sign the bill into law.
The bill was passed by the House on June 30 and the Senate on July 15, following the agreement of a House-Senate conference committee to reconcile the bills passed by each chamber earlier this year.
After the president signs the bill into law, it will move into the regulatory stage. Regulators must draft, review and approve more than 200 regulations to comply with the new law. The process could take up to two years.
Here are the main points of the bill:
Volcker rule: Banks are prohibited from engaging in some types of proprietary trading. Banks will be restricted in their ability to sponsor or invest in private equity or hedge funds.
Interchange fee: The Federal Reserve will set debit card interchange fees. The Fed will be required to consider the cost of protecting against fraud when determining whether fees are “reasonable and proportional,” and merchants will be allowed to offer discounts for certain payment types.
Preemption: States will be allowed to impose consumer protection laws on national banks if the state laws are stricter than federal laws. The Comptroller of the Currency may preempt state laws if they "prevent or significantly" interfere with the business of banking.
Derivatives: Banks may continue using derivatives to hedge their own risk, but some other derivatives business must be moved to separately capitalized subsidiaries of holding companies.
Federal Reserve oversight: An audit of the Fed's emergency lending programs developed in response to the financial crisis will be required. For the first time, the Fed also will disclose, with a two-year lag, details of loans it makes to banks through its discount window and open market transactions. Bankers who serve as directors of Federal Reserve Banks will no longer participate in the election of presidents of those banks.
Capital: Holding companies with more than $15 billion in total assets will have five years to exclude trust preferred securities and other financial instruments from holding company tier 1 capital. The requirement includes a three-year phase-in period.
Deposit insurance: Deposit insurance will be permanently increased to $250,000 for each eligible account, retroactive to Jan. 1, 2008, and the Transaction Guarantee Program will be extended through 2012. The assessment base will be changed to assets minus tangible capital
Investor protection: The SEC is empowered to adopt a variety of new rules to protect investors, including the authority to impose a fiduciary standard of care on broker-dealers who provide investment advice.
Other provisions of the legislation also will affect: oversight, including the elimination of the Office of Thrift Supervision; the thrift charter, which will be preserved; business checking, which banks may pay interest on; risk retention for securitizations; accounting oversight; and the Sarbanes-Oxley Act’s auditor requirements."
"Congress has approved the biggest overhaul of financial industry regulations since the Great Depression, and President Obama soon will sign the bill into law.
The bill was passed by the House on June 30 and the Senate on July 15, following the agreement of a House-Senate conference committee to reconcile the bills passed by each chamber earlier this year.
After the president signs the bill into law, it will move into the regulatory stage. Regulators must draft, review and approve more than 200 regulations to comply with the new law. The process could take up to two years.
Here are the main points of the bill:
Volcker rule: Banks are prohibited from engaging in some types of proprietary trading. Banks will be restricted in their ability to sponsor or invest in private equity or hedge funds.
Interchange fee: The Federal Reserve will set debit card interchange fees. The Fed will be required to consider the cost of protecting against fraud when determining whether fees are “reasonable and proportional,” and merchants will be allowed to offer discounts for certain payment types.
Preemption: States will be allowed to impose consumer protection laws on national banks if the state laws are stricter than federal laws. The Comptroller of the Currency may preempt state laws if they "prevent or significantly" interfere with the business of banking.
Derivatives: Banks may continue using derivatives to hedge their own risk, but some other derivatives business must be moved to separately capitalized subsidiaries of holding companies.
Federal Reserve oversight: An audit of the Fed's emergency lending programs developed in response to the financial crisis will be required. For the first time, the Fed also will disclose, with a two-year lag, details of loans it makes to banks through its discount window and open market transactions. Bankers who serve as directors of Federal Reserve Banks will no longer participate in the election of presidents of those banks.
Capital: Holding companies with more than $15 billion in total assets will have five years to exclude trust preferred securities and other financial instruments from holding company tier 1 capital. The requirement includes a three-year phase-in period.
Deposit insurance: Deposit insurance will be permanently increased to $250,000 for each eligible account, retroactive to Jan. 1, 2008, and the Transaction Guarantee Program will be extended through 2012. The assessment base will be changed to assets minus tangible capital
Investor protection: The SEC is empowered to adopt a variety of new rules to protect investors, including the authority to impose a fiduciary standard of care on broker-dealers who provide investment advice.
Other provisions of the legislation also will affect: oversight, including the elimination of the Office of Thrift Supervision; the thrift charter, which will be preserved; business checking, which banks may pay interest on; risk retention for securitizations; accounting oversight; and the Sarbanes-Oxley Act’s auditor requirements."
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