The conference report of the Dodd-Frank Wall Street Reform and Consumer Protection Act creates a new regulatory framework for the supervision of financial holding companies and their non-bank subsidiaries, and provides new standards for interstate bank mergers, interstate bank acquisitions by bank holding companies, de novo branching for national and state banks, and charter selection and conversion (see Title VI).
Increasing Supervision of Holding Companies and Their Subsidiaries
Sections 604 and 605 of the conference report broaden the supervisory powers afforded to the Federal Reserve Board to supervise the activities of holding companies and their non-bank subsidiaries. The conference report permits the Federal Reserve to review other supervisory materials – “reports and supervisory information” – provided to regulators by the holding company or any of its subsidiaries to get a better sense of the risk profile of non-depository subsidiaries of the holding company. In addition, the Federal Reserve is permitted to commence examinations of the holding company and its subsidiaries, with a particular focus on prudential concerns such as the safety and soundness of the institution, the overall stability of the U.S. financial system, as well as a review of the compliance of the holding company and its subsidiaries with relevant provisions of federal law.
The conference report attempts to reduce the burden of additional regulatory examinations on financial institutions and regulators, with the Federal Reserve instructed to rely on reports from prior examinations by other federal or state regulators in order to get a preliminary picture of the condition of the holding company and its subsidiary. The conference report further requires the Federal Reserve to coordinate its activities with the functional regulator of a subsidiary; for example, should the conference report be enacted, the Federal Reserve is required to consult with the OCC for its review of a national bank and to consult with the Securities Exchange Commission for its review of a securities or brokerage subsidiary.