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Inside Washington (05/06/2011)
* WASHINGTON (5/9/11)--Midsize banks that barely meet the $50 billion threshold as systemically important, as defined in the Dodd-Frank Act, will be treated differently than the largest financial institutions, Federal Reserve Chairman Ben Bernanke said Thursday (American Banker May 6). The Fed will use a graduated approach in how it will require banks of all sizes to implement higher capital and liquidity requirements, Bernanke said, adding there will not be a discrete difference in how the Fed treats banks of similar asset sizes. Many in the banking industry have maintained that size alone should not dictate which institutions are considered systemically important. Bernanke's comments indicate that despite the $50 billion threshold, the largest banks will hold more capital and face tougher prudential regulation than those that just meet the standard … * WASHINGTON (5/9/11)--Although there is still doubt whether the Dodd-Frank Act ended “too big to fail” regulators must ensure that discipline is restored to the financial sector, Federal Deposit Insurance Corp. Chairman Sheila Bair said in a speech Thursday. “On one hand, there is concern that new regulations could impose onerous costs on banks and the economy, stifling financial innovation and economic growth,” Bair said. “On the other, there is alarm about the scale and seemingly indiscriminate nature of the government assistance provided to large financial companies during the crisis, and what effects these actions will have on the competitive landscape.” Bair said a major improvement with systemically important financial institutions (SIFI) is the resolution process. When a large, complex financial institution gets into trouble, time is the enemy, she said. A larger financial institution will take longer to assemble a resolution strategy. By requiring detailed resolution plans in advance, and authorizing an on-site FDIC team to conduct pre-resolution planning, the SIFI resolution framework regains the informational advantage that was lacking in the financial crisis, Bair said. “As far-reaching as these changes are, their ultimate effectiveness will still depend on the willingness of the FDIC and the Federal Reserve to actively use their authority to require organizational changes that promote the ability to resolve SIFIs,” she added … * WASHINGTON (5/9/11)--Federal Reserve Board Chairman Ben Bernanke said Thursday new regulatory reform rules resulting from the Dodd-Frank Act will make the financial system safer and less susceptible to risk (American Banker May 6). New risk retention requirements, tougher underwriting standards, and rules on off-balance sheet accounting have corrected many problems that led to the financial crisis, Bernanke said. Regulators must be aware of changes within the financial system and guard against new risks they present, he said, adding he was confident regulators now have mechanisms to adapt to any future shocks the financial system would experience …


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