Washington, DC – July 29, 2014 – A new article demonstrates that the Dodd-Frank Act did not consider every bank holding company with $50 billion or more in assets to be systemically significant. In “Section 165 Revisited: Rethinking Enhanced Prudential Regulations,” which is featured in the most recent edition of Banking Perspective, Andrew Olmem, a partner at Venable LLP, has written a legislative history of Section 165 of the Dodd-Frank, which authorizes the Federal Reserve to implement enhanced prudential standards for banks with consolidated assets of $50 billion or more.
In the article, Mr. Olmem points out that the Senate Banking Committee Report on Dodd-Frank explicitly states that the $50 billion threshold would “include, but not be limited to, those companies whose failures potentially pose risk to U.S. financial stability.” Thus, just because a bank may satisfy that threshold, it is not necessarily systemic under Dodd-Frank. Moreover, the text of Section 165 envisions enhanced prudential standards being applied with “Tailored Application” to specific risks and “adapted” to a bank holding company’s business model. The implications of this legislative history are that the strict use of asset thresholds to determine enhanced prudential standards is at odds with the intent and text of Dodd-Frank. It also indicates that the Federal Reserve’s application of enhanced prudential standards covers too many institutions and is not sufficiently tailored.
A partner in Venable’s nationally recognized Financial Services, and Legislative and Government Affairs Groups, Mr. Olmem’s practice focuses on financial services regulation and policy. Prior to joining the firm, Mr. Olmem served as the Chief Counsel (minority) for the U.S. Senate Banking Committee. He served on the staff of the Banking Committee from 2005 to 2013, including serving as Senior Counsel during Congress' consideration of the Dodd-Frank Act.
Banking Perspective is the quarterly journal of The Clearing House.
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