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As the next step in developing the FDIC's implementation of
its authority under the Dodd-Frank Act to resolve systemically
important financial institutions ("SIFIs"), FDIC acting
chairman Martin Gruenberg outlined the major components of its
resolution strategy in a May 10, 2012 speech to the Federal Reserve Bank of
Chicago Bank Structure Conference. The FDIC would
place the SIFI's parent bank holding company into receivership
and revoke its charter, while allowing its subsidiaries to continue
operations with government-provided liquidity, should the Treasury
Department and several federal agencies agree that a SIFI presents
a risk of systemic consequences. Additionally, the FDIC would
transfer most of the troubled SIFI's assets and some
liabilities into a bridge company, which would undergo a swap of
debt for equity, similar to a Chapter 11 restructuring under the
bankruptcy statutes. The recapitalized company would
eventually emerge as a new, private entity.
The process outlined by the FDIC acting chairman is part of the
agency's effort to develop the "orderly liquidation
authority" it was granted by the Dodd-Frank Act, and to
convince the financial industry that SIFIs neither have an
unlimited public backstop, nor will they cause destabilizing
disruptions when under financial strain. Additionally, the
FDIC has established the Office of Complex Financial Institutions
to monitor risk and coordinate with foreign regulators. It
has also issued final rules governing the priority of claims under the orderly
liquidation authority and requiring SIFIs to submit "living
wills" to the FDIC periodically (discussed in the
September 20, 2011 Financial Services Alert).
Finally, the FDIC has worked through the Financial Stability Board
to develop a statement of "Key Attributes of Effective
Resolution Regimes for Financial Institutions" and has engaged
with foreign financial regulators on a bilateral basis to plan for
joint resolution efforts addressing the cross-border operations of
SIFIs and the global nature of systemic risk.
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A senior SEC lawyer has recently encouraged the private equity and hedge fund communities to consider whether certain practices of private fund managers could subject these firms to SEC registration as broker-dealers.
In November 2012, the U.S. District Court for the Eastern District of New York preliminarily approved a settlement agreement in the In re Payment Card Interchange Fee and Merchant Discount Antitrust Litigation.
Federal bank regulatory agencies have served notice that deposit advance products will soon be subject to significant new restrictions and heightened supervisory scrutiny.
