Title III - Transfer of Powers to the Comptroller of the Currency, the Corporation, and the Board of Governors
Title III of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the Act) constitutes the “Enhancing Financial Institution Safety and Soundness Act of 2010" and provides: (1) the mechanics for the orderly dissolution of the Office of Thrift Supervision (OTS) and the transfer of the authorities of the OTS and the Director of the OTS (the Director) to the Comptroller of the Currency (the Comptroller), the Federal Deposit Insurance Corporation (the FDIC), and the Board of Governors of the Federal Reserve System (the Board); (2) authority to assess large bank and savings and loan holding companies and nonbank financial companies supervised by the Board; and (3) for deposit insurance reforms.
Dissolution of OTS
Section 312 of the Act:1 allocates the authorities of the OTS and the Director as follows:2
To the Board:
- Supervision of all savings and loan holding companies;
- Supervision of any subsidiary of a savings and loan holding company (other than a depository institution subsidiary);
- All rulemaking authority relating to savings and loan holding companies;
- All rulemaking authority under Section 11 of the Home Owners’ Loan Act (HOLA)3 with respect to transactions with affiliates and extensions of credit to executive officers, directors, and principal shareholders; and
- All rulemaking authority under Section 5(q) of HOLA relating to tying arrangements.
To the Comptroller (except as otherwise transferred to the Board):
- All functions relating to Federal savings associations; and
- All rulemaking authorities relating to savings associations.
To the FDIC (except as otherwise transferred to the Board or the Comptroller):
- All functions relating to state associations.
OTS actions and proceedings pending at the Transfer Date will be transferred to the corresponding agency. OTS orders, resolutions, agreements, determinations and regulations (including proposed and final, but not yet effective, regulations), interpretations, guidelines, procedures, and other advisory materials in effect at the Transfer Date will continue in effect and will be enforced by (or against) the corresponding agencies until modified, terminated or set aside in accordance with applicable laws.4
The OTS and the office of the Director will be abolished 90 days after the Transfer Date.
Assessments by the Board
Section 317(s) requires the Board to collect assessments, fees and other charges from all bank and savings and loan holding companies having total consolidated assets of $50 billion or more and all nonbank financial companies supervised by the Board under Section 113 of the Act in order to fund its operations for the supervision and regulation of such entities.
Deposit Insurance Reforms
Title III establishes a number of deposit insurance reforms that became effective on July 22, 2010, including:
- Requiring the FDIC to change the deposit insurance assessment base from deposits to average consolidated total assets minus average tangible equity (with additional potential adjustments for custodial banks and banker’s banks);5
- Permitting the FDIC to suspend or limit the payment of dividends back to insured depository institutions that are in excess of the reserve ratio;6
- Establishing a minimum reserve ratio of 1.35% of estimated insured deposits, which is to be obtained by September 30, 2020;7
- Increasing the maximum deposit insurance amount to $250,000 and retroactively providing $250,000 in maximum deposit insurance to depositors in institutions that failed on or after January 1, 2008, and before October 3, 2008;8 and
- Extending for two years beginning December 31, 2010, and ending on January 1, 2013, the FDIC’s “TAG” account program whereby certain noninterest bearing transaction accounts are fully insured deposits without limit and do not count against other deposits at the institution.9
Savings Associations Converting to Banks
Section 341 of the Act confirms that savings associations that convert to banks may continue to operate any branch or agency that the association operated immediately before the association converted, and authorizes savings associations to operate additional branches and agencies at any location within any State in which the savings association operated a branch immediately before conversion, if the State law would permit a State bank to establish a branch in that location.
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[1] Various sections of Title III provide for conforming amendments to the National Bank Act, the Federal Deposit Insurance Act, the Bank Holding Company Act, Home Owners’ Loan Act, and other banking statutes.
[2] The transfer will occur on July 22, 2011 (the Transfer Date), unless an extension is granted under the Act’s provisions. The Transfer Date may be extended beyond July 22, 2011, for a period not in excess of 18 months if the United States Secretary of the Treasury (Treasury Secretary), in consultation with the Comptroller, the Director, the Chairperson of the FDIC and the Chairman of the Board, provides notice to the Committee on Banking, Housing and Urban Affairs of the Senate and the Committee on Financial Services of the House of Representatives that contains the determination that an orderly process is not feasible, the reasons for the extension, the new transfer dates, and a description of the steps that will be taken to implement the process in an orderly and timely way. Notice of the new Transfer Date must be published in the Federal Register not later than 270 days following July 22, 2010.
[3] 12 U.S.C. 1461 et seq.
[4] Section 316.
[5] Section 331.
[6] Section 332.
[7] Section 334. Further, the FDIC is charged with offsetting the effect of the increase of the reserve ratio on insured depository institutions with total consolidated assets less than $10 billion.
[8] Section 335. This section also provides for a similar increase in share insurance under the Federal Credit Union Act.
[9] Section 343. A corresponding change was made to the Federal Credit Union Act.
If you have questions regarding anything you have read on Title III, please contact any of the attorneys listed below or your regular Sutherland contact.
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Roadmaps
Title III - Key Provisions and Regulatory Rulemakings
Other Resources
FDIC Holds First in a Series of Roundtables on Financial Reform
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