Who Regulates Whom? An Overview of U.S.
Financial Supervision
Who Regulates Whom? An Overview of U.S. Financial Supervision Contents Introduction ………………………………………………………………………………………………………………..1 What Financial Regulators Do………………………………………………………………………………………..1 Banking Regulation ……………………………………………………………………………………………………..6 Safety and Soundness Regulation………………………………………………………………………………6 Deposit Insurance …………………………………………………………………………………………………..7 Capital Regulation ………………………………………………………………………………………………….7 Systemic Risk ………………………………………………………………………………………………………..8 Capital Requirements……………………………………………………………………………………………………8 Basel III………………………………………………………………………………………………………………..9 Capital Provisions in Dodd-Frank ……………………………………………………………………………10 Non-Bank Capital Requirements ……………………………………………………………………………..12 The SEC’s Net Capital Rule………………………………………………………………………………12 CFTC Capital Requirements ……………………………………………………………………………..12 Federal Housing Finance Agency ……………………………………………………………………….13 The Federal Financial Regulators ………………………………………………………………………………….14 Banking Regulators……………………………………………………………………………………………….14 Office of the Comptroller of the Currency ……………………………………………………………15 Federal Deposit Insurance Corporation………………………………………………………………..15 The Federal Reserve…………………………………………………………………………………………16 Office of Thrift Supervision (Abolished by Dodd-Frank)………………………………………..17 National Credit Union Administration …………………………………………………………………18 Non-Bank Financial Regulators……………………………………………………………………………….18 Securities and Exchange Commission …………………………………………………………………18 Commodity Futures Trading Commission ……………………………………………………………21 Federal Housing Finance Agency ……………………………………………………………………….21 Bureau of Consumer Financial Protection ……………………………………………………………22 Regulatory Umbrella Groups…………………………………………………………………………………..23 Financial Stability Oversight Council………………………………………………………………….23 Federal Financial Institution Examinations Council……………………………………………….24 President’s Working Group on Financial Markets ………………………………………………….24 Unregulated Markets and Institutions …………………………………………………………………………….25 Foreign Exchange Markets……………………………………………………………………………………..25 U.S. Treasury Securities …………………………………………………………………………………………25 Private Securities Markets………………………………………………………………………………………26 Comprehensive Reform Legislation in the 111th Congress ……………………………………………26
Table 1.Federal Financial Regulators and Who They Supervise
Regulatory Agency :Federal Reserve Institutions Regulated :
Bank holding companiesa and certain subsidiaries, financial holding companies, securities holding companies, savings and loan holding companies, and any firm designated as systemically significant by the FSOC State banks that are members of the Federal Reserve System, U.S. branches of foreign banks, and foreign branches of U.S. banks Payment, clearing, and settlement systems designated as systemically significant by the FSOC, unless regulated by SEC or CFTC
Federal Reserve Emergency/Systemic Risk Powers:Lender of last resort to member banks (through discount window lending) In “unusual and exigent circumstances” the Fed may extend credit beyond member banks, for the purpose of providing liquidity to the financial system, but not to aid failing financial firms May initiate resolution process to shut down firms that pose a grave threat to financial stability (requires concurrence of 2/3 of the FSOC).
Office of the Comptroller of the Currency (OCC)Institutions Regulated:
National banks, U.S. federal branches of foreign banks, federally chartered thrift institutions.
Federal Deposit Insurance Corporation (FDIC)Institutions Regulated:Federally-insured depository institutions, including state banks that are not members of the Federal Reserve System and state-chartered thrift institutions .
National Credit Union Administration (NCUA):Federally-chartered or insured credit unions .
Regulatory Agency Securities and Exchange Commission (SEC) Institutions Regulated :Securities exchanges, brokers, and dealers; clearing agencies; mutual funds; investment advisers (including hedge funds with assets over $150 million) Nationally-recognized statistical rating organizations Security-based swap (SBS) dealers, major SBS participants, SBS execution facilities Corporations selling securities to the public must register and make financial disclosures .
Commodity Futures Trading Commission (CFTC) Institutions Regulated :Futures exchanges, brokers, commodity pool operators, commodity trading advisors Swap dealers, major swap participants, swap execution facilities.
Federal Housing Finance Agency (FHFA) Institutions Regulated :Fannie Mae, Freddie Mac, and the Federal Home Loan Banks.
Bureau of Consumer Financial Protection Institutions Regulated :Nonbank mortgage-related firms, private student lenders, payday lenders, and larger “consumer financial entities” to be determined by the Bureau Consumer businesses of banks with over $10 billion in assets Does not supervise insurers, SEC and CFTC registrants, auto dealers, sellers of nonfinancial goods, real estate brokers and agents, and banks with assets less than $10 billion