Dodd–Frank Wall Street Reform and Consumer Protection Act Introduction A bill that aims to increase government oversight of trading in complex financial instruments such as derivatives. The Dodd-Frank Regulatory Reform Bill was named after Senator Christopher J. Dodd and U.S. Representative Barney Frank. The restrictions placed on the types of proprietary trading that financial institutions will be allowed to practice are intended to prevent the collapse of major financial institutions such as Lehman Brothers. The stated aim of the legislation is: To promote the financial stability of the United States by improving accountability and transparency in the financial system, to end "too big to fail", to protect the American taxpayer by ending bailouts, to protect consumers from abusive financial services practices, and for other purposes.
Dodd–Frank Wall Street Reform and Consumer Protection Act Overview The Act is categorized into sixteen titles and by one law firm's count, it requires that regulators create 243 rules, conduct 67 studies, and issue 22 periodic reports. The Act changes the existing regulatory structure, such as creating a host of new agencies (while merging and removing others) in an effort to streamline the regulatory process, increasing oversight of specific institutions regarded as a systemic risk, amending the Federal Reserve Act, promoting transparency, and additional changes. The Act establishes rigorous standards and supervision to protect the economy and American consumers, investors and businesses, ends taxpayer funded bailouts of financial institutions, provides for an advanced warning system on the stability of the economy, creates rules on executive compensation and corporate governance, and eliminates the loopholes that led to the economic recession.
Dodd–Frank Wall Street Reform and Consumer Protection Act Provisions Title I - Financial Stability Title II - Orderly Liquidation Authority Title III - Transfer of Powers to the Comptroller, the FDIC, and the FED Title IV - Regulation of Advisers to Hedge Funds and Others Title V – Insurance Title VI - Improvements to Regulation Title VII - Wall Street Transparency and Accountability Title VIII - Payment, Clearing and Settlement Supervision Title IX - Investor Protections and Improvements to the Regulation of Securities Title X - Bureau of Consumer Financial Protection Title XI - Federal Reserve System Provisions Title XII - Improving Access to Mainstream Financial Institutions Title XIII - Pay It Back Act Title XIV - Mortgage Reform and Anti-Predatory Lending Act Title XV - Miscellaneous Provisions Title XVI - Section 1256 Contracts
Basel III BASEL III (sometimes "Basel 3") refers to a new update to the Basel Accords that is under development. The Bank for International Settlements (BIS) itself began referring to this new international regulatory framework for banks as "Basel III" in September 2010. The draft Basel III regulations include: – tighter definitions of Common Equity; banks must hold 4.5% by January 2015, then a further 2.5%, total 7% – the introduction of a leverage ratio, – a framework for counter-cyclical capital buffers, – measures to limit counterparty credit risk, – and short and medium-term quantitative liquidity ratios.
Basel III Too-big-to-fail institutions that took on too much risk – a large part of these risks being driven by new innovations that took advantage of regulatory and tax arbitrage with no effective constraints on leverage. Insolvency resulting from contagion and counterparty risk, driven mainly by the capital market (as opposed to traditional credit market) activities of banks, and giving rise to the need for massive taxpayer support and guarantees. Banks simply did not have enough capital. The lack of regulatory and supervisory integration, which allowed promises in the financial system to be transformed with derivatives and passed out to the less regulated and capitalised industries outside of banking – such as insurance and re- insurance. The same promises in the financial system were not treated equally. The lack of efficient resolution regimes to remove insolvent firms from the system. This issue, of course, is not independent of the structure of firms which might be too-big-to- fail. Switzerland, for example, might have great difficulty resolving a UBS or a Credit Suisse – given their size relative to the economy. They may have less trouble resolving a failed legally separated subsidiary.