Barclays 2010 Annual Report Download - page 144

Risk management
Supervision and regulation continued
United States
The Dodd-Frank Wall Street Reform and Consumer Protection Act (DFA)
was signed into law in July 2010. The Act provides for a new Financial
Stability Oversight Council (FSOC), governmental resolution authority
for failing non-depository financial institutions (including bank holding
companies) under the aegis of the Federal Deposit Insurance Corporation,
reorganisation of several of the bank supervisory agencies, a new
Consumer Financial Protection Bureau (CPFB) and a federal Insurance
Office. It also imposes harsher capital, liquidity and leverage requirements,
as well as wide-ranging new requirements including for derivatives, hedge
funds, private equity funds, credit rating agencies, debit card interchange
fees and corporate governance. The full scale of the DFA’s impact on the
Group remains unclear because the rules required to implement many
of the provisions of DFA have, in most cases, not been implemented and,
in several important areas, have yet to be proposed by the responsible
agencies. Nonetheless, certain provisions of the DFA are particularly likely
to have an effect on the Group. These include:
– The ability of the FSOC to make recommendations to the Federal
Reserve regarding the establishment of heightened supervisory
requirements and prudential standards applicable to ‘systematically
important’ entities and activities and work with all primary financial
regulatory agencies to establish regulations, as necessary, to address
financial stability concerns. It is not yet clear what regard the FSOC or
the other agencies will have to the home country prudential regulators
of non-US organisations such as the FSA, in the case of the Group;
– The so-called ‘Volcker Rule,’ which will, once effective, significantly
restrict the ability of US bank holding companies and their affiliates,
and the US branches of foreign banks, to conduct proprietary trading
in securities and derivatives as well as certain activities related to
hedge funds and private equity funds. The Volcker Rule is likely to have
a significant impact on some of the Group’s US operations. The DFA
states that the Rule does not affect activities conducted ‘entirely’ outside
the United States by non-US organisations, but the Federal Reserve has
not indicated how it intends to interpret this exclusion in practice;
– Significant changes to the trading and regulation of derivatives and
participants in the derivatives markets. Among the changes mandated
by the DFA are that many types of derivatives now traded in the
over-the-counter markets be traded on an exchange or swap execution
facility and centrally cleared. In addition, many participants in these
markets will be required to register with the US Commodity Futures
Trading Commission (CFTC) as ‘swap dealers’ or ‘major swap
participants’ and/or with the US SEC as ‘securities swap dealers
or major securities swap dealers’ and be subject to CFTC and SEC
regulation and oversight. Barclays Bank PLC and one or more of its
US subsidiaries may be subjected to these requirements;
– In addition to the ability of the FSOC to recommend heightened
prudential standards for specific institutions the DFA, separate and
apart from Basel III, also imposes higher capital, liquidity and leverage
requirements on US banks and bank holding companies generally; and
– The ability of the CPFB to regulate the credit card industry, including
the terms of credit card agreements with consumers, disclosures, and
fees. Actions by the CPFB in this area are likely to impact the Group’s
US credit card business.
142 Barclays PLC Annual Report 2010 www.barclays.com/annualreport10