Class Twenty-Three: November 6, 2014

In today's class we will discuss the Dodd Frank enhanced prudential regulation for systemically important financial conglomerates (other than the increased capital which has been discussed previously). We will begin with a discussion of the Federal Reserve Board rules for enhanced prudential oversight of systemically important bank holding companies (US headquartered only). We will then turn to the Dodd-Frank Act procedures for the designation of other systemically important financial institutions, a topic we previewed in Class One with the FSOC order regarding Prudential Insurance. After reviewing that order, take a look at the Research Paper on the Designation of Insurance Companies as Systemically Important to get a sense of the FSOC procedures. We will then compare designation standards of the Financial Stability Board, which are summarized in the FSB’s Consultative Document. If time permits, we will also touch open the ongoing debate over the designation of elements of the asset management industry as systemically important. In this regard, compare the Executive Summary of the Report of the Office of Financial Research (September 2013) with BlackRock piece by Barbara Novick (March 2014). Readings: Davis Polk, Post Dodd-Frank Bank Regulation by Size Davis Polk, U.S. Bank Holding Companies: Overview of Dodd-Frank Enhanced Prudential Standards (Feb. 24, 2014) Research Paper on the Designation of Insurance Companies as Systemically Important (December 2013) Financial Stability Board, Consultative Document: Assessment Methodologies for Identifying Non-Bank Non-Insurer Global Systemically Important Financial Institutions (Jan. 2014) Office of Financial Research, Asset Management and Financial Stability (Sept. 2013) Barbara Novick, Systemic Risk and Asset Management: Improving the Financial Ecosystem for All Market Participants (March 2014)