The Resolution of Systemically Important Nonbank Financial Companies... Will It Work?
By: Stanley V. Ragalevsky, Sarah J. Ricardi
One of the glaring problems exposed by the recent financial crisis has been the absence of supervisory authority to deal effectively with the insolvency or collapse of significant, nonbank financial companies. While bank regulators have long been empowered to close and liquidate insolvent banks to protect the public, there was no comparable authority vested in any financial services regulator to close and liquidate insolvent bank holding companies or other kinds of financial companies. To make matters worse, when several systemically important financial companies were on the verge of collapse in September 2008, they were deemed “too big to fail” and given significant government assistance. Title II of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act” or the “Act”) addresses the absence of regulatory authority to liquidate systemically important, nonbank financial companies by creating an “orderly liquidation authority” (“OLA”) process to allow the Treasury Secretary to close and the Federal Deposit Insurance Corporation (“FDIC”) to wind up these companies.
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This client alert is part of a series of alerts focused on monitoring financial regulatory reform. Below is a list of other alerts in the series:
Loan Servicing Déjà Vu - July 14, 2010
Financial Regulatory Reform Increases Federal Involvement in Insurance - July 13, 2010
Preemption for National Banks and Federal Thrifts After Dodd-Frank: Answers to the Ten Most Asked Questions - July 9, 2010
Increased Regulation of U.S. and Non-U.S. Private Fund Advisers Under the Dodd-Frank Act - July 9, 2010
Hope You Like Plain Vanilla! Mortgage Reform and Anti-Predatory Lending Act (Title XIV) - July 8, 2010
Consumer Financial Services Industry, Meet Your New Regulator - July 7, 2010
New Executive Compensation and Governance Requirements in Financial Reform Legislation - July 7, 2010
Financial Regulatory Reform - The Next Chapter: Unprecedented Rulemaking and Congressional Activity - July 7, 2010
Investor Protection Provisions of Dodd-Frank - July 1, 2010
Senate Financial Reform Bill Would Dramatically Step Up Regulation of U.S. and Non-U.S. Private Fund Advisers - June 8, 2010
Approaching the Home Stretch: Senate Passes “Restoring American Financial Stability Act of 2010” - June 8, 2010
