FDIC Launches Unit to Liquidate Banks under Dodd-Frank

The Federal Deposit Insurance Corp (FDIC) is launching a new Office of Complex Financial Institutions (CFI) and Division of Depositor and Consumer Protection (DCP) to comply with the Dodd-Frank Act, which recently passed. “The FDIC plans to vigorously implement its new authorities under the Dodd-Frank Act, which ends the presumption of ‘too big to fail’ for the largest and most complex financial institutions,” FDIC Chairman Sheila Bair said. “The creation of our new Office of Complex Financial Institutions is a critical first step in this process.” The CFI will review bank holding companies (BHCs) with more than $100bn of assets as well as non-bank financial companies designated as systemically important by the new Financial Stability Oversight Council. The CFI unit will also carry out the FDIC’s new authority to implement orderly liquidations of failed BHCs and non-bank financial firms. The DCP division will ensure banks comply with consumer protection and fair lending regulations. Under Dodd-Frank financial reform, the new consumer protection bureau will create rules that the FDIC will enforce among banks with $10bn or less in assets. The division will also house FDIC staff to answer public questions regarding deposit insurance and the use of FDIC-insured bank accounts. “Our depositor protection and compliance examination and enforcement responsibilities are integral to our unique responsibilities as deposit insurer and supervisor of thousands of community banks,” Bair said. “The creation of this new division emphasizes the importance we place on these responsibilities and is directly responsive to Congress’s intent in the new legislation. DCP will also complement the activities of the new Consumer Financial Protection Bureau that is being established within the Federal Reserve.” Additionally, the Dodd-Frank Act eliminates the reserve ratio cap for the FDIC’s Deposit Insurance Fund (DIF) and increases the minimum reserve ratio from 1.15% to 1.35% of estimated insured deposits, according to commentary from the Philadelphia Federal Reserve Bank. Insured depository institutions with assets over $10bn will be charged higher premiums to rebuild the DIF. Under Dodd-Frank, the Office of Thrift Supervision will be abolished and the Office of the Comptroller of the Currency will become the primary regulator for thrifts and national banks of all sizes and for holding companies below the $50bn threshold. The FDIC will regulate all state-chartered thrifts and banks. Write to Diana Golobay