Chapter
Sovereign Debt Issues in Europe
Accounting Measures of Asset Values
Heightened Risk Management
Structural Vulnerabilities
APPENDIX A. GLOSSARY OF TERMS
Chapter 2 FINANCIAL STABILITY OVERSIGHT COUNCIL CREATED UNDER THE DODD‐FRANK WALL STREET REFORM AND CONSUMER PROTECTION ACT: FREQUENTLY ASKED QUESTIONS
Q: What Is the Financial Stability Oversight Council and What will it Do?
Q: How will the FSOC Help Maintain our Nation’s Financial Stability?
Q: What Can the American People Expect from the FSOC?
Q: Who DOES the FSOC Report to?
Q: Will FSOC Meetings Be Open to the Public?
Q: How has Treasury Been Working with other Federal Agencies to form the FSOC?
Q: Who Serves on the FSOC?
Chapter 3 OFFICE OF FINANCIAL RESEARCH CREATED UNDER THE DODD‐FRANK WALL STREET REFORM AND CONSUMER PROTECTION ACT: FREQUENTLY ASKED QUESTIONS
Q: What Is the Office of Financial Research (OFR)?
Q: How will the OFR Cooperate with the FSOC and Financial Regulators?
Q: How will Standardization of Financial Data Improve Oversight and Reduce Costs?
Q: What Is a Legal Entity Identifier (LEI) and What does the OFR’s Statement of Policy Say?
Chapter 4 MACROECONOMIC EFFECTS OF RISK RETENTION REQUIREMENTS
II. THE STATUTORY MANDATE
III. SECURITIZATION AND ITS MACROECONOMIC EFFECTS
Development of the Securitization Market
Securitization’s Role in the Financial Crisis
IV. RISK RETENTION AND THE DODD-FRANK ACT
Regulatory Reforms to Securitization
Risk Retention and its Macroeconomic Effects
V. ESTABLISHING A FRAMEWORK FOR RISK RETENTION
Constructing a Robust Risk Retention Framework
Vertical (Pro Rata) Risk Retention
Horizontal (First Loss) Risk Retention
Third-Party Credit Guarantors
Hedging, Prevention of Arbitrage, and Risk Management
Exemptions through Underwriting Standards
VI. ADJUSTING RISK RETENTION REQUIREMENTS
Calibrating Risk Retention Requirements
Considerations Regarding Static and Proactive Adjustment of Risk Retention
APPENDIX A: OTHER RELEVANT SECTIONS OF THE DODD-FRANK ACT
Rating Agencies - Title IX, Subtitle C
Disclosure - Title IX, Subtitle D, Section 942 and 945
Representations and Warranties - Title IX, Subtitle D, Section 943
Underwriting Process and Consumer Protection – Title XIV, Section 1412
APPENDIX B: OTHER RELEVANT REGULATORY INITIATIVES
Statements of Financial Accounting Standards Nos. 166 and 16744
International Comparisons - Article 122a
Chapter 5 STUDY AND RECOMMENDATIONS REGARDING CONCENTRATION LIMITS ON LARGE FINANCIAL COMPANIES
Summary of Conclusions and Recommendations
PART A: SUMMARY OF SECTION 622, AS ENACTED
2. Scope of Financial Companies Subject to the Concentration Limit
3. Calculation of a Financial Company’s Liabilities
4. Statutory Exceptions and Interpretations
PART B: EFFECTS OF THE CONCENTRATION LIMIT
1. Overall Effects of the Concentration Limit
2. Effects of the Concentration Limit on Future Financial Stability
3. Effects of the Concentration Limit on Moral Hazard
4. Effects of the Concentration Limit on the Efficiency and Competitiveness of U.S. Financial Firms and Markets
5. Effects of the Concentration Limit on the Cost and Availability of Credit and Other Financial Services
PART C: RECOMMENDATIONS REGARDING MODIFICATIONS TO THE CONCENTRATION LIMIT
2. Recommended Modifications to the Concentration Limit
2.1. Definition of “Liabilities” for Certain Companies
2.2. Collection, Aggregation and Public Dissemination of Concentration Limit Data
2.3. Acquisition of Failing Insured Depository Institutions
Chapter 6 STUDY AND RECOMMENDATIONS ON PROHIBITIONS ON PROPRIETARY TRADING AND CERTAIN RELATIONSHIPS WITH HEDGE FUNDS AND PRIVATE EQUITY FUNDS
OVERVIEW OF STUDY AND RECOMMENDATIONS
Recommended Actions to Effectively Implement the Volcker Rule
Summary of Conclusions and Recommendations
Sponsorship of and Investments in Hedge Funds and Private Equity Funds
THE STATUTORY MANDATE AND OBJECTIVES OF THE STUDY
PUBLIC OUTREACH AND COMMENTS
Sponsorship of and Investments in Hedge Funds and Private Equity Funds
Implementation Considerations
Permitted Activities that Are Difficult to Distinguish from Proprietary Trading Activities
Other Transactions on Behalf of Customers
Challenges in Delineating Proprietary Trading Activities from Permitted Activities
Principles for Implementation of the Volcker Rule
Rules and Supervision Should Prohibit Improper Proprietary Trading Using All Necessary Tools
Rules and Supervision Should Be Dynamic and Flexible
Rules and Supervision Should Enable Comparisons among Banking Entities
Rules and Supervision Should Facilitate Predictable Evaluation of Outcomes
Rules and Supervision Should Account for Differences among Asset Classes
Delineation of Proprietary Trading and Certain Permitted Activities
Identification of “Bright Line” Proprietary Trading
Indicia of Certain Permitted Activities
Implementation of the Proprietary Trading Prohibition
Programmatic Compliance Regime
Internal Policies and Procedures
Internal Quantitative and other Controls
Recordkeeping and Reporting Systems
Ceo and Board Accountability
Analysis and Reporting of Quantitative Metrics
Calculating Inventory Turnover and Aging
Methodology for Analyzing Metrics
Role of the Office of Financial Research
Supervisory Review and Oversight
Periodic Review and Testing of Internal Controls and Procedures
Ongoing Supervisory Monitoring and Review of Trading Activities
Frequent Communication with Trading Personnel
Review of Quantitative Metrics for Red Flags
Enforcement Procedures for Violations
Application to other Related Activities
Statutory Limitations on Permitted Activities
Material Conflicts of Interest
Material Exposure to High-Risk Assets or High-Risk Trading Strategies
Poses a Threat to Safety and Soundness of Banking Entity
Poses a Threat to Financial Stability of United States
How the Volcker Rule Relates to Existing and Pending Regulation
Risk to the Federal Safety Net and Cross-Subsidization
Strengthening Capital Rules for Banking Entities
HEDGE FUND AND PRIVATE EQUITY FUND INVESTMENT RESTRICTIONS
Limitations on Permitted Activities
Restrictions on Relationships and Transactions with Private Equity Funds and Hedge Funds
Arm’s Length Transactions
Principles for Implementation
Implementation of Prohibited Activities
Issues Regarding Implementation of Prohibited Activities
Scope of Prohibited Investments
Implementation of Permitted Activities
Issues regarding Implementation of Permitted Activities
The ―Customer" Requirement
Prohibiting Covered Transactions
Clarifying the Term ―Banking Entity‖
Investment and Risk Oversight
Management and Public Attestation
THE ACCOMMODATION OF THE BUSINESS OF INSURANCE
Limitations on Qualified Activity
Other Issues Related to the Business of Insurance
Chapter 7 REPORT TO THE CONGRESS ON SECURED CREDITOR HAIRCUTS
I. INTRODUCTION AND EXECUTIVE SUMMARY
III. SECURED CREDITOR HAIRCUTS
A. Mechanics of Secured Creditor Haircuts
1. Haircuts on the Value of the Secured Claim
2. Determining the Haircut Amount
3. Limitation on Orderly Liquidation Authority
4. Amounts Realized in Resolution
5. Security Interests of the Federal Government
6. Relationship to the QFC Safe Harbors
B. Assessing the Impact of Secured Creditor Haircuts
1. Intended Benefits of Secured Creditor Haircuts
(c) Collateral Demands on Distressed Firms
2. Qualifications Regarding the Intended Benefits of Secured Creditor Haircuts
(a) Qualifications Regarding Market Discipline
(b) Qualifications Regarding Taxpayer Protection
(c) Qualifications Regarding Collateral Demands on Distressed Firms
3. Potential Drawbacks of Secured Creditor Haircuts
(c) Amounts Available to other Creditors
IV. COMPARISON OF TREATMENT OF SECURED CREDITORS UNDER DIFFERENT RESOLUTION MECHANISMS
3. Avoidance and Recovery Powers
(b) Fraudulent (Constructive) Transfer Avoidance
5. Protections against Lien Stripping in Bankruptcy
6. Surcharge of Secured Creditor’s Collateral
C. Federal Deposit Insurance Act
1. 90-Day Receivership Stay
2. Avoidance and Recovery Powers
3. Mechanisms for Expanding and Administering the Estate
(a) Power to Repudiate and Enforce Contracts
(b) Bridge Depository Institution
(c) Administration of the Receivership
(d) Treatment of Secured Creditors
4. Division of Assets among the Parties
5. The Systemic Risk Exception to the Least Cost Resolution Requirement
D. Orderly Liquidation Authority
2. Impact on Secured Creditors of the Orderly Liquidation Authority
(b) Avoidance and Recovery Actions
3. Advance Planning under the Dodd-Frank Act
(b) Credit Exposure Reports
E. Summary of Comparison of Resolution Mechanisms
V. OTHER REFORMS THAT PROTECT TAXPAYERS FROM LOSS AND PROMOTE MARKET DISCIPLINE
A. Title I of the Dodd-Frank Act
1. Capital, Leverage and Liquidity
3. Single Counterparty Credit Exposure Limits
(a) The Definition of Capital
(b) Enhanced Risk Coverage
(c) Other Mechanisms to Limit Procyclicality
C. Increased Transparency of Funding Arrangements
1. Transparency in the Context of Tri-Party Repo
2. Transparency of Short-Term Funding Arrangements
APPENDIX A: OVERVIEW OF CERTAIN FORMS OF SECURED LENDING
B. Tri-Party Repos and Intraday Lending
III. Sell-Buyback Arrangements
Financial Stability Oversight Council: Overview and Select Studies
( Business Economics in a Rapidly-Changing World )
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