FDIC 2010 ANNUAL REPORT 13

Enacted on July 21, 2010, the DoddFrank Wall Street Reform and Consumer 

Protection Act (“the Dodd-Frank Act” 

or “the Act”) provides the most comprehensive 

legislative reform of the U.S. financial sector 

since the 1930s. Aimed at addressing the causes 

of the financial crisis of the last few years, the 

Act, among other things, provides for a more 

comprehensive, macro perspective for identifying 

and taking action in response to emerging risks 

in financial sectors and closing regulatory gaps; 

heightened prudential supervision of systemically 

important nonbank financial companies and large, 

interconnected bank holding companies; orderly 

liquidation of systemically important nonbank 

financial companies and bank holding companies; 

elimination of open assistance to preserve a 

failing insured depository institution; improved 

consumer financial protections and mortgage 

lending practices; and enhanced transparency 

and supervision of over-the-counter derivatives, 

swaps, and securities activities; and other investor 

protections. The Act significantly impacts the 

FDIC in its roles as supervisor, receiver, and 

deposit insurer, as well as making changes to the 

FDIC’s corporate structure.

Supervision

The Dodd-Frank Act creates a new risk oversight 

umbrella group, the Financial Stability Oversight 

Council (FSOC). In an effort to mitigate potential 

systemic risks, the FSOC is empowered to 

designate certain nonbank financial companies 

for supervision by the Board of Governors of 

the Federal Reserve System (Federal Reserve) 

and to make recommendations for heightened 

prudential supervision of those nonbank financial 

companies and bank holding companies with total 

consolidated assets of $50 billion or more. The 

FSOC also may designate systemically important 

financial market utilities or payment, clearing 

or settlement activities. The FDIC is one of ten 

voting members of the FSOC.

The FSOC’s recommendations may include, 

for example, leverage limits, risk-based capital 

requirements, liquidity requirements, and 

concentration limits. The Federal Reserve will 

be responsible for implementing heightened 

prudential standards and supervising such firms. 

These firms also may be subject to orderly 

liquidation under Title II of the Act, in which 

the FDIC will act as receiver to resolve the firm 

through a process similar to that used to resolve 

failed insured depository institutions. The Act 

requires the FDIC and the Federal Reserve to issue 

joint regulations implementing the requirement 

that these systemically important financial 

companies develop plans for their rapid and 

orderly resolution in the event of material financial 

distress or failure. It also gives the FDIC backup 

examination authority over these systemically 

important financial companies.

The Dodd-Frank Act abolishes the Office 

of Thrift Supervision (OTS) and transfers 

responsibility for thrift supervision to the Office 

of the Comptroller of the Currency (OCC) and 

Dodd-Frank Wall Street 

Reform and Consumer 

Protection Act
14 FDIC 2010 ANNUAL REPORT

the FDIC, as of the statutory “transfer date” (i.e., 

July 21, 2011). The FDIC will be responsible for 

the supervision of state chartered thrifts, while the 

OCC will supervise federal thrifts. The Federal 

Reserve will supervise thrift holding companies 

and their non-depository institution subsidiaries.

The Dodd-Frank Act also creates a new Consumer 

Financial Protection Bureau (CFPB) within the 

Federal Reserve System. The CFPB will have 

exclusive rulemaking authority for specified federal 

consumer protection laws and will also have 

examination and primary enforcement authority 

for many nonbank financial service providers and 

insured depository institutions (IDIs) and credit 

unions with total assets of over $10 billion (and 

any affiliated IDIs). With regard to IDIs over $10 

billion otherwise in its jurisdiction, the FDIC 

will have backup enforcement authority for laws 

over which the CFPB has primary authority. The 

FDIC retains its current authority and programs 

under the Community Reinvestment Act and 

other consumer related laws not specified for 

all IDIs within its jurisdiction. It also retains all 

examination and enforcement authorities over 

IDIs with total assets of $10 billion or less within 

its jurisdiction. Examination coordination and 

information sharing with the new CFPB 

is required.

Receivership

As noted, the FDIC may be appointed as receiver 

for a failed systemically significant nonbank 

financial company or large, interconnected 

bank holding company. The orderly liquidation 

authority is similar to the resolution authority for 

IDIs under the Federal Deposit Insurance Act. 

However, no monies from the DIF may be used in 

connection with an orderly liquidation under Title 

II of the Act. Those resolutions will be funded 

initially by borrowing against the assets of the 

failed financial company, with the borrowings to 

be repaid from asset sales and, if necessary, from 

“clawbacks” of certain additional payments and 

from additional risk-based assessments against 

large financial companies. The Act expressly 

prohibits the use of taxpayer funds to prevent the 

liquidation of any financial company under Title 

II, and taxpayers shall bear no losses from the 

exercise of any authority under Title II.

Deposit Insurance

The Dodd-Frank Act permanently increases 

the standard maximum deposit insurance 

amount to $250,000, and made the increase 

retroactive to January 1, 2008. The Act also 

provides temporary unlimited deposit insurance 

coverage for noninterest-bearing transaction 

accounts for two years from December 31, 2010, 

through December 31, 2012. During this time, 

all noninterest-bearing transaction accounts 

are fully insured, regardless of the balance in 

the account and the ownership capacity of the 

funds. This coverage is available to all depositors, 

including consumers, businesses, and government 

entities. The unlimited coverage is separate 

from, and in addition to, the standard insurance 

coverage provided for a depositor’s other accounts 

held at an FDIC-insured bank.

The Act directs the FDIC to amend its regulations 

to define “assessment base” as average consolidated 

total assets minus average tangible equity. For 

custodial banks and banker’s banks, the FDIC 

may subtract an additional amount as necessary to 

ensure that the assessment appropriately reflects 

the risk posed by such institutions.

The Act eliminates the maximum limitation 

on the designated reserve ratio (DRR) and 

raises the minimum DRR from 1.15 percent to 
FDIC 2010 ANNUAL REPORT 15

1.35 percent of estimated insured deposits. It 

requires the FDIC to take such steps as may be 

necessary for the reserve ratio of the DIF to reach 

1.35 percent of estimated insured deposits by 

September 30, 2020. The FDIC must offset the 

effect on IDIs with total consolidated assets of 

less than $10 billion of this one-time requirement 

to reach 1.35 percent by that date rather than 

1.15 percent by the end of 2016. The Act also 

eliminates the payment of dividends from the DIF 

when the reserve ratio is between 1.35 percent 

and 1.50 percent and provides the FDIC sole 

discretion to limit or suspend dividends when the 

reserve ratio exceeds 1.50 percent.

FDIC Corporate Structure

The Dodd-Frank Act places the Director of the 

CFPB on the FDIC Board in lieu of the Director 

of the OTS. In addition, the Act requires the 

FDIC to establish by January 21, 2011, an Office 

of Minority and Women Inclusion (OMWI) 

to develop standards for equal employment 

opportunity and the racial, ethnic, and gender 

diversity of the agency’s workforce and senior 

management; increase participation of minorityand women-owned businesses in agency programs 

and contracts; and assess the diversity policies and 

practices of entities regulated by the agency. The 

OMWI is also to advise the agency on the impact 

of policies and regulations on minority- and 

women-owned businesses. The FDIC transferred 

the responsibilities of the Office of Diversity and 

Economic Opportunity to OMWI, effective 

January 21, 2011.

Other Financial 

Regulatory Reforms

The Act also makes a number of other 

reforms, including:

Q Requiring that minimum leverage and 

risk-based capital requirements for IDIs, 

depository institution holding companies and 

nonbank financial companies supervised by 

the Federal Reserve can be no lower than the 

generally applicable requirements in effect on 

July 21, 2010 (the “Collins Amendment”);

Q Prohibiting bank holding companies and 

their affiliates from engaging in proprietary 

trading or sponsoring or investing in a hedge 

fund or private equity fund (the so-called 

“Volcker Rule”);

Q Requiring greater transparency and regulation 

of over-the-counter derivatives, assetbacked securities (including risk retention 

requirements), hedge funds, mortgage brokers 

and payday lenders;

Q Requiring the financial regulators to 

prohibit incentive compensation at financial 

institutions that encourages excessive 

risk taking;

Q Providing new rules for transparency and 

accountability for credit rating agencies and 

requiring regulators to eliminate regulatory 

reliance on credit ratings; and

Q Establishing a Federal Insurance Office to, 

among other things, participate in the FSOC 

and monitor issues in the insurance industry.