Dodd-Frank Wall Street 
                              Reform and Consumer 
                              Protection Act
                                       nacted on July 21, 2010, the Dodd-               the Federal Reserve System (Federal Reserve) 
                              EFrank Wall Street Reform and Consumer                    and to make recommendations for heightened 
                                       Protection Act (“the Dodd-Frank Act”             prudential supervision of those nonbank financial 
                              or “the Act”) provides the most comprehensive             companies and bank holding companies with total 
                              legislative reform of the U.S. financial sector            consolidated assets of $50 billion or more. The 
                              since the 1930s. Aimed at addressing the causes           FSOC also may designate systemically important 
                              of the financial crisis of the last few years, the         financial market utilities or payment, clearing 
                              Act, among other things, provides for a more              or settlement activities. The FDIC is one of ten 
                              comprehensive, macro perspective for identifying          voting members of the FSOC.
                              and taking action in response to emerging risks 
                              in financial sectors and closing regulatory gaps;          The FSOC’s recommendations may include, 
                              heightened prudential supervision of systemically         for example, leverage limits, risk-based capital 
                              important nonbank financial companies and large,           requirements, liquidity requirements, and 
                              interconnected bank holding companies; orderly            concentration limits. The Federal Reserve will 
                              liquidation of systemically important nonbank             be responsible for implementing heightened 
                              financial companies and bank holding companies;            prudential standards and supervising such firms. 
                              elimination of open assistance to preserve a              These firms also may be subject to orderly 
                              failing insured depository institution; improved          liquidation under Title II of the Act, in which 
                              consumer financial protections and mortgage                the FDIC will act as receiver to resolve the firm 
                              lending practices; and enhanced transparency              through a process similar to that used to resolve 
                              and supervision of over-the-counter derivatives,          failed insured depository institutions. The Act 
                              swaps, and securities activities; and other investor      requires the FDIC and the Federal Reserve to issue 
                              protections. The Act significantly impacts the             joint regulations implementing the requirement 
                              FDIC in its roles as supervisor, receiver, and            that these systemically important financial 
                              deposit insurer, as well as making changes to the         companies develop plans for their rapid and 
                              FDIC’s corporate structure.                               orderly resolution in the event of material financial 
                                                                                        distress or failure. It also gives the FDIC backup 
                              Supervision                                               examination authority over these systemically 
                              The Dodd-Frank Act creates a new risk oversight           important financial companies.
                              umbrella group, the Financial Stability Oversight         The Dodd-Frank Act abolishes the Office 
                              Council (FSOC). In an effort to mitigate potential        of Thrift Supervision (OTS) and transfers 
                              systemic risks, the FSOC is empowered to                  responsibility for thrift supervision to the Office 
                              designate certain nonbank financial companies              of the Comptroller of the Currency (OCC) and 
                              for supervision by the Board of Governors of 
                                                                                                           FDIC 2010 ANNUAL REPORT                        13
                   the FDIC, as of the statutory “transfer date” (i.e.,      initially by borrowing against the assets of the 
                   July 21, 2011). The FDIC will be responsible for          failed financial company, with the borrowings to 
                   the supervision of state chartered thrifts, while the     be repaid from asset sales and, if necessary, from 
                   OCC will supervise federal thrifts. The Federal           “clawbacks” of certain additional payments and 
                   Reserve will supervise thrift holding companies           from additional risk-based assessments against 
                   and their non-depository institution subsidiaries.        large financial companies. The Act expressly 
                                                                             prohibits the use of taxpayer funds to prevent the 
                   The Dodd-Frank Act also creates a new Consumer            liquidation of any financial company under Title 
                   Financial Protection Bureau (CFPB) within the             II, and taxpayers shall bear no losses from the 
                   Federal Reserve System. The CFPB will have                exercise of any authority under Title II.
                   exclusive rulemaking authority for specified federal 
                   consumer protection laws and will also have               Deposit Insurance
                   examination and primary enforcement authority             The Dodd-Frank Act permanently increases 
                   for many nonbank financial service providers and           the standard maximum deposit insurance 
                   insured depository institutions (IDIs) and credit         amount to $250,000, and made the increase 
                   unions with total assets of over $10 billion (and         retroactive to January 1, 2008. The Act also 
                   any affiliated IDIs). With regard to IDIs over $10         provides temporary unlimited deposit insurance 
                   billion otherwise in its jurisdiction, the FDIC           coverage for noninterest-bearing transaction 
                   will have backup enforcement authority for laws           accounts for two years from December 31, 2010, 
                   over which the CFPB has primary authority. The            through December 31, 2012. During this time, 
                   FDIC retains its current authority and programs           all noninterest-bearing transaction accounts 
                   under the Community Reinvestment Act and                  are fully insured, regardless of the balance in 
                   other consumer related laws not specified for              the account and the ownership capacity of the 
                   all IDIs within its jurisdiction. It also retains all     funds. This coverage is available to all depositors, 
                   examination and enforcement authorities over              including consumers, businesses, and government 
                   IDIs with total assets of $10 billion or less within      entities. The unlimited coverage is separate 
                   its jurisdiction. Examination coordination and            from, and in addition to, the standard insurance 
                   information sharing with the new CFPB                     coverage provided for a depositor’s other accounts 
                   is required.                                              held at an FDIC-insured bank.
                   Receivership                                              The Act directs the FDIC to amend its regulations 
                   As noted, the FDIC may be appointed as receiver           to define “assessment base” as average consolidated 
                   for a failed systemically significant nonbank              total assets minus average tangible equity. For 
                   financial company or large, interconnected                 custodial banks and banker’s banks, the FDIC 
                   bank holding company. The orderly liquidation             may subtract an additional amount as necessary to 
                   authority is similar to the resolution authority for      ensure that the assessment appropriately reflects 
                   IDIs under the Federal Deposit Insurance Act.             the risk posed by such institutions.
                   However, no monies from the DIF may be used in 
                   connection with an orderly liquidation under Title        The Act eliminates the maximum limitation 
                   II of the Act. Those resolutions will be funded           on the designated reserve ratio (DRR) and 
                                                                             raises the minimum DRR from 1.15 percent to 
       14             FDIC 2010 ANNUAL REPORT
                            1.35 percent of estimated insured deposits. It         Other Financial  
                            requires the FDIC to take such steps as may be         Regulatory Reforms
                            necessary for the reserve ratio of the DIF to reach    The Act also makes a number of other  
                            1.35 percent of estimated insured deposits by          reforms, including:
                            September 30, 2020. The FDIC must offset the 
                            effect on IDIs with total consolidated assets of       Q Requiring that minimum leverage and 
                            less than $10 billion of this one-time requirement         risk-based capital requirements for IDIs, 
                            to reach 1.35 percent by that date rather than             depository institution holding companies and 
                            1.15 percent by the end of 2016. The Act also              nonbank financial companies supervised by 
                            eliminates the payment of dividends from the DIF           the Federal Reserve can be no lower than the 
                            when the reserve ratio is between 1.35 percent             generally applicable requirements in effect on 
                            and 1.50 percent and provides the FDIC sole                July 21, 2010 (the “Collins Amendment”);
                            discretion to limit or suspend dividends when the      Q Prohibiting bank holding companies and  
                            reserve ratio exceeds 1.50 percent.                        their affiliates from engaging in proprietary 
                            FDIC Corporate Structure                                   trading or sponsoring or investing in a hedge 
                            The Dodd-Frank Act places the Director of the              fund or private equity fund (the so-called 
                            CFPB on the FDIC Board in lieu of the Director             “Volcker Rule”);
                            of the OTS. In addition, the Act requires the          Q Requiring greater transparency and regulation 
                            FDIC to establish by January 21, 2011, an Office            of over-the-counter derivatives, asset-
                            of Minority and Women Inclusion (OMWI)                     backed securities (including risk retention 
                            to develop standards for equal employment                  requirements), hedge funds, mortgage brokers 
                            opportunity and the racial, ethnic, and gender             and payday lenders;
                            diversity of the agency’s workforce and senior 
                            management; increase participation of minority-        Q Requiring the financial regulators to 
                            and women-owned businesses in agency programs              prohibit incentive compensation at financial 
                            and contracts; and assess the diversity policies and       institutions that encourages excessive  
                            practices of entities regulated by the agency. The         risk taking;
                            OMWI is also to advise the agency on the impact        Q Providing new rules for transparency and 
                            of policies and regulations on minority- and               accountability for credit rating agencies and 
                            women-owned businesses. The FDIC transferred               requiring regulators to eliminate regulatory 
                            the responsibilities of the Office of Diversity and         reliance on credit ratings; and
                            Economic Opportunity to OMWI, effective 
                            January 21, 2011.                                      Q Establishing a Federal Insurance Office to, 
                                                                                       among other things, participate in the FSOC 
                                                                                       and monitor issues in the insurance industry.
                                                                                                    FDIC 2010 ANNUAL REPORT                     15