Dodd-Frank Act - Title 1: Financial Stability (Part 2)

In this article we understand in some detail the sub-titles of Title 1.

The Council is authorized to make recommendations to the Federal Reserve concerning the establishment and refinement of prudential standards and reporting and disclosure requirements applicable to systemically important companies, to prevent or mitigate risk to U.S. financial stability that could arise from the material financial distress, failure or ongoing activities of these companies.

In making recommendations, the Council may differentiate among systemically important companies on an individual basis or by category, taking into consideration their capital structure, riskiness, the scope and complexity of their financial activities’ riskiness and any other risk related factors that the Council deems appropriate.

For bank holding companies, the Council may recommend an asset threshold above $50 billion taking into account it’s contingent capital, resolution plans, credit exposure reporting, concentration limits, enhanced public disclosures and short-term debt limits. The Council may not recommend a higher threshold for risk-based capital requirements, leverage limits, liquidity requirements and overall risk-management requirements.

Recommending Jurisdictional Dispute Resolution: The Council must seek to resolve supervisory jurisdictional disputes among Council members if certain conditions are satisfied, including at the request of an agency involved. Recommendations by the Council, to be taken by 2/3 vote, are not binding.

Council Subject to GAO Audit: The GAO may audit the activities of the Council and any person or entity acting on behalf of or under the Council. The GAO may request and make copies of any records or other information under the control of or used by the Council or of a person or entity acting on behalf of or under the authority of the Council, and may have access to officers, directors and employees or agents of the Council.

Council Study on the Effects of Size and Complexity of Financial Institutions: The Act calls for the Council to conduct an ongoing study on the economic impact of possible financial services regulatory limitations intended to reduce systemic risk. The study must estimate the costs and

benefits on the efficiency of the capital markets, the financial sector and on national economic growth of imposing on large financial institutions limits on size, organizational complexity, interconnectedness or other limitations on activities or structure that may limit systemic risk. The Council must report to Congress within 180 days after enactment and at least every 5 years thereafter on the results of the study.