Fifth Third Bank 2010 Annual Report Download - page 137

Fifth Third Bancorp 135
things, to declare acts “unfair, deceptive or abusive” and to
require certain consumer disclosures.
Debit Card Interchange Fees
The Dodd-Frank Act provides for a set of new rules requiring
that interchange transaction fees for electric debit transactions
be “reasonable” and proportional to certain costs associated
with processing the transactions. The FRB is given authority to
establish standards for assessing whether interchange fees are
reasonable and proportional.
FDIC Matters
The Dodd-Frank Act creates an orderly liquidation process that
the FDIC can employ for failing financial companies that are
not insured depository institutions. The Dodd-Frank Act gives
the FDIC new authority to create a widely available emergency
financial stabilization program to guarantee the obligations of
solvent depository institutions and their holding companies and
affiliates during times of severe economic stress. Additionally
Dodd-Frank also codifies many of the temporary changes that
had already been implemented, such as permanently increasing
the amount of deposit insurance to $250,000.
Volker Rule
In the “Volker Rule,” the Dodd-Frank Act sets forth new
restrictions on banking organizations’ ability to engage in
proprietary trading and sponsorship of or investment in private
equity and hedge funds. The Volker Rule also generally
prohibits any banking entity from sponsoring or acquiring any
ownership interest in a private equity or hedge fund. The
Volker Rule, however, contains a number of exceptions. The
Volker Rule permits transactions in the securities of the U.S.
government and its agencies, certain government-sponsored
enterprises and states and their political subdivisions, as well as
certain investments in small business investment companies.
Transactions on behalf of customers and in connection with
certain underwriting and market making activities, as well as
risk-mitigating hedging activities and certain foreign banking
activities are also permitted. Dodd-Frank also defines certain
parameters with respect to a permissible de minimis investment
in a private equity or hedge fund that the banking entity
organizes and offers. In addition to the general prohibition on
sponsorship and investment, the Volker Rule contains a second
set of requirements applicable to any private equity or hedge
fund that is sponsored by the banking entity or for which it
serves as investment manager or investment advisor.
Derivatives
The Dodd-Frank Act sets forth a new regulatory system for the
U.S. market for swaps and other over-the-counter derivatives.
Under this new regime, all derivatives transactions and all
entities that enter into them could be subject to potential
regulations, and the goal of the regulatory framework is to
promote the stability of the entire financial system and further
transparency and competition in the derivatives market.
Interstate Bank Branching
The Dodd-Frank Act includes provisions permitting national
and insured state banks to engage in de novo interstate
branching if, under the laws of the state where the new branch
is to be established, as state bank chartered in that state would
be permitted to establish a branch.
Capital
The Dodd-Frank Act instructs the FRB to seek to make capital
requirements applicable to bank holding companies
countercyclical, with a higher level required in times of
economic expansion and lower level needed in times of
economic contraction.
Systemically Significant Companies
The Dodd-Frank Act creates a new regulatory regime for
entities that are deemed to be “systemically significant financial
companies.” The Dodd-Frank Act sets a $50 billion
consolidated asset floor for a bank holding company to be
subject to the heightened oversight and regulation, although the
FRB can adjust those amounts upward for some of the
heightened standards under certain circumstances. Dodd-Frank
establishes a broad framework for identifying, applying
heightened supervision and regulation to, and (as necessary)
limiting the size and activities of systemically significant
financial companies. Under the Dodd-Frank Act, a new regime
for the orderly liquidation of financial companies whose failure
would pose systemic risk is also created.