Fed Likely to Delay Slew of Critical Dodd-Frank Rules

Federal Reserve Board officials promised to unveil their package of key Dodd-Frank rules by the end of the summer, but some predict they may not be out until early October. The rules, which implement Section 165 of the Dodd-Frank Act, will explain how the Federal Reserve Board (Fed) plans to regulate large, interconnected financial institutions and non-banks. The rules will cover major issues in financial services, including whether these firms will face an additional capital surcharge and how to deal with systematically important companies that fail. The scope is likely the reason the Fed is taking more time to get these critical rules out, because it sets the tone for how the Fed and other agencies will treat these institutions. This delay does not seem to bother the industry, which wants the agencies to get these critical rules right, instead of producing a rushed product that could lead to unforeseen consequences. However, the industry wants to see the rules soon to get a clearer picture of what areas of weakness or gaps they will need to focus on. One main area of concern about the rules is how the Fed will regulate non-banks deemed systematically important. Most expect that the Fed will tread carefully in showing some flexibility and will not be too prescriptive across the board. The industry certainly does not want rigidity, because it would put certain institutions in a box.

American Banker (09/01/11) Borak, Donna