In order to "streamline and rationalize" the supervision of depository institutions and their holding companies, Title III of the Dodd-Frank Wall Street Reform and Consumer Protection Act eliminates the Office of Thrift Supervision and transfers its authorities to other federal banking regulators.
The transfer will occur within 12 to 18 months after the date of enactment. All powers, authorities, rights and duties will be transferred to (a) the Board of Governors of the Federal Reserve System with respect to the supervision of savings and loan holding companies and their nondepository subsidiaries, (b) the OCC with respect to the supervision of Federal savings associations and rulemaking authority with respect to all Federal and State savings associations, and (c) the FDIC with respect to the supervision of State savings associations.
In addition to eliminating the OTS, the Enhancing Financial Institution Safety and Soundness Act of 2010 incorporates a number of other significant changes to the regulation of banks. The Act includes a permanent increase in the standard maximum deposit insurance amount from $100,000 to $250,000, a two-year extension of the FDIC's Transaction Account Guarantee Program regarding unlimited insurance for noninterest-bearing transaction accounts, and substantial revisions to regulatory agency assessment authority.
A list of the OTS regulations to be expressly enforced by the FRB, OCC and FDIC will be published in the Federal Register on or before the transfer date. All other orders, resolutions, rules, regulations and "other advisory materials" of the OTS and the Director of the Office of Thrift Supervision are to continue in full force and effect, at least until modified, terminated or superseded in accordance with applicable law. During this transition period, policy and interpretation differences between, for example, the OTS and the OCC may exist until the OCC revises or supersedes such policy pronouncements.
Assessments for Examinations and Oversight
The Act expands authority for assessments, fees and other charges by the OCC, FDIC and FRB. Interestingly, the power given to the OCC and the FDIC to collect such assessments, fees and other charges is discretionary; they "may" be charged to the extent necessary or appropriate to carry out the responsibilities of the OCC or to meet the expenses of the FDIC. In comparison, the FRB "shall" collect assessments, fees or other charges from all bank holding companies and savings and loan holding companies having total consolidated assets equal to or greater $50 billion dollars as well as from all nonbank financial companies supervised by the FRB under Title I of the Act.
Deposit Insurance Fund and FDIC Assessment Base
The FDIC is directed to revise the definition of "assessment base" to mean an amount equal to (1) the average consolidated total assets of the insured depository institution during the assessment period, minus (2) the sum of the average tangible equity of the insured depository institution during the assessment period. As the new assessment base is focused on total assets rather than deposits, the funding of federal deposit insurance is proportionally shifted to larger institutions or at least those that rely less on deposits for funding their operations. The Act increases the Deposit Insurance Fund minimum reserve ratio and gives the FDIC until September 30, 2020, to grow the DIF to the new minimum ratio of 1.35 percent of estimated deposits.
FDIC Dividends to Insured Depository Institutions
The FDIC is given greater authority to suspend or limit the payment of dividends to insured depository institutions. Rather than requiring the FDIC to declare dividends if certain DIF reserve ratios are met, the Act gives the FDIC sole discretion to declare or pay such dividends. Previous factors in declaring such dividends are eliminated.
Increases in Deposit and Share Insurance
The Act makes permanent the increase in the standard maximum deposit insurance amount from $100,000 to $250,000 for bank and credit union deposits. The $250,000 level was established during the financial crisis and scheduled to expire on December 31, 2013. These maximum insurance levels are retroactively applied to the failed institutions for which the FDIC was appointed as receiver or conservator between January 1, 2008, and October 3, 2008. In addition, the entire net amount of deposits in "non-interest" bearing deposit or credit union accounts are to be fully insured, without respect to any maximum insurance levels. Such insurance of non-interest bearing accounts is a codification of the FDIC's existing Transaction Account Guarantee Program (with a slightly narrower definition of covered accounts), which the Act effectively extends for two years beyond its scheduled sunset on December 31, 2010.
Role of Director for Consumer Financial Protection Bureau
Previously, the five members of the Board of Directors of the FDIC consisted of the Comptroller of the Currency, the Director of the Office of Thrift Supervision and three persons appointed by the President with the advice and consent of the Senate. The Act replaces the Director of the OTS with the Director of the Consumer Financial Protection Bureau, thereby enhancing the voice of the Consumer Financial Protection Bureau and its coordination with existing financial regulatory institutions.
Conversion of Savings Associations to Banks
Any savings association that becomes a bank may continue to operate any of its existing branches, regardless of location. In addition, it may establish new branches in any State in which the savings association operated a branch immediately before it became a bank, so long as such State would otherwise permit the establishment of the branch as if it were a bank chartered by the State.