Final Roundtable Comment on FSOC Concentration Limits - FINAL 031011

Brennen

Description

RICHARD M. WHITING 1001 PENNSYLVANIA AVE., NW SUITE 500 SOUTH WASHINGTON, DC 20004 TEL [phone] FAX [phone] EMAIL: [e-mail] March 9, 2011 www.fsround.org Financial Stability Oversight Council Attn: Mr. Amias Gerety 1500 Pennsylvania Avenue, N.W. Washington, D.C. 20220 Re: Study and Recommendations Regarding Concentration Limits on Large Financial Companies File Number: FR Doc. 2011-2717 Dear Mr. Gerety: The Financial Services Roundtable (the “Roundtable”) appreciates the opportunity to provide the Financial Stability Oversight Council (the “Council”) with its comments on the Study & Recommendations Regarding Concentration Limits on Large Financial Companies (the “Study”) implementing section 622 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”), as provided for in the notice and request for comment 1published in the Federal Register on February 8, 2011. The Financial Services Roundtable represents 100 of the largest integrated financial services companies providing banking, insurance, and investment products and services to the American consumer. Member companies participate through the Chief Executive Officer and other senior executives nominated by the CEO. Roundtable member companies provide fuel for America’s economic engine, accounting directly for $92.7 trillion in managed assets, $1.2 trillion in revenue, and 2.3 million jobs. The Roundtable fully supports ...

Informations

• Publié par: Voem
• Nombre de lectures: 11
• Langue: English

Extrait

March 9, 2011

Financial Stability Oversight Council

Attn: Mr. Amias Gerety

1500 Pennsylvania Avenue, N.W.

Washington, D.C. 20220

Re:

Study and Recommendations Regarding Concentration Limits on Large Financial

Companies

File Number: FR Doc. 2011-2717

Dear Mr. Gerety:

The Financial Services Roundtable (the “Roundtable”) appreciates the opportunity to

provide the Financial Stability Oversight Council (the “Council”) with its comments on the

Study & Recommendations Regarding Concentration Limits on Large Financial Companies

(the “Study”) implementing section 622 of the Dodd-Frank Wall Street Reform and Consumer

Protection Act (the “Dodd-Frank Act”), as provided for in the notice and request for comment

published in the Federal Register on February 8, 2011.

1

The Financial Services Roundtable represents 100 of the largest integrated financial

services companies providing banking, insurance, and investment products and services to the

American consumer.

Member companies participate through the Chief Executive Officer and

other senior executives nominated by the CEO.

Roundtable member companies provide fuel

for America’s economic engine, accounting directly for $92.7 trillion in managed assets, $1.2

trillion in revenue, and 2.3 million jobs.

The Roundtable fully supports the Dodd-Frank Act’s

goal of promoting financial stability.

Section 622 of the Dodd-Frank Act

2

establishes a concentration limit on financial firms,

and requires that not later than 6 months after the date of its enactment, the Council complete a

study that analyzes the concentration limit and makes recommendations to the Board of

Governors of the Federal Reserve System (the “Board”) as to the implementation of the

concentration limit.

3

1

76 Fed. Reg. 6756 (February 8, 2011).

2

12 U.S.C. § 1852.

3

12 U.S.C. § 1852(e)(1).

RICHARD M. WHITING

1001 P

ENNSYLVANIA

A

VE

., NW

S

UITE

500 S

OUTH

WASHINGTON, DC 20004

TEL [phone]

FAX [phone]

EMAIL: [e-mail]

www.fsround.org

The Roundtable supports the Council’s recommendations with respect to two specific

issues: (i) the timing of the calculation of the aggregate consolidated liabilities of all financial

companies, and (ii) the types of failed financial institutions the acquisition of which should be

exempt from the concentration limit.

The Roundtable recommends through the Council that

the Board adopt final rules implementing these recommendations.

Collection, Aggregation and Public Dissemination of Concentration Limit Data

Section 622 requires a financial company to comply with the concentration limit with

respect to aggregate financial company liabilities as calculated as of the end of the most recent

calendar year.

The Study notes data accuracy and measurement volatility issues relating to

implementation of this requirement.

With respect to data accuracy, the Study notes (i) the fact

that financial companies are not required to report year-end financial data until a specific time

in the next calendar year, and (ii) the likelihood that the Board would need an additional period

of time to aggregate, verify and publish the data collected at the end of the calendar year.

With respect to measurement volatility, the Study notes the possibility that applying the

denominator for any given year based on a “snapshot” of the aggregate liability calculation

would introduce unnecessary volatility into the concentration limit measure.

To address the

data accuracy issue, the Council recommends that the Board’s rules provide that the Board

publicly report, on an annual basis not later than July 1 of any calendar year, a final calculation

of the aggregate consolidated liabilities of all financial companies as of the end of the

preceding calendar year.

4

To address the measurement volatility issue, the Council

recommends that the Board use the average of financial company aggregate liabilities as of the

end of the prior two years as the denominator in the concentration limit, rather than just using

the financial company aggregate liabilities figure as of the end of the prior year.

5

The Roundtable supports these recommendations.

Publishing a denominator in the

middle of the year would greatly increase the certainty of financial companies seeking to plan

their operations, thus helping to address the data issue.

A published denominator would

remedy uncertainty.

The measurement volatility issue would be addressed by using the

average of the final aggregate financial company liabilities from the prior two years, because

the additional data in the denominator would mitigate the “snapshot” effect and reduce the

volatility associated with one-time occurrences.

Acquisition of Failed Insured Depository Institutions

Section 622 includes an exception from the concentration limit for a financial

company’s acquisition of a bank in default or danger of default, subject to the prior written

consent of the Board.

6

By its terms, the exception applies to a failing “bank,” rather than a

failing depository institution.

The Study notes that the Bank Holding Company Act (the “BHC

Act”), within which section 622 is codified, excludes several categories of insured depository

4

Study at 20.

5

Study at 21.

6

12 U.S.C. § 1852 (c)(1).

institutions from the term “bank,” including savings associations, industrial loan companies,

limited-purpose credit card banks and limited-purpose trust companies.

7

In order to promote

the important public interest of limiting costs to the Deposit Insurance Fund (the “DIF”)

resulting from the failure of insured depository institutions, the Council recommends that the

“concentration limit be modified to except from the concentration limit an acquisition of a

failed insured depository institution.”

8

The Roundtable supports this recommendation.

The Roundtable supports broadening

the exception so that a failed insured depository institution may be acquired and can continue

to provide banking services to its local community.

A broader exception may also mitigate the

impact of insured depository institution failure on the DIF.

Conclusion

As the Council continues its analysis of the financial system in the context of

implementation of the Dodd-Frank Act, the Roundtable knows that the Council will remain

committed to thorough and comprehensive treatment of the relevant issues.

The Roundtable

commends the Council for the Study’s recognition of the effects of uncertainty on financial

stability, and also knows that the Council will take into account the effects of its

recommendations on market certainty as it continues with the Dodd-Frank implementation

process.

The Roundtable thanks the Council for the opportunity to comment.

If you have any

questions, please feel free to contact me or Brian Tate at [phone].

Sincerely,

Richard M. Whiting

Executive Director and General Counsel

7

Study at 22, citing 12 U.S.C. § 1841(c).

8

Study at 22.