It’s been nearly three years since the implementation of the Dodd-Frank Act, so it seems like as good a time as any to reflect on what has been accomplished, what still needs to be done and how the Dodd-Frank Act sits with other regulatory reform projects.
Federal Reserve Governor Daniel Tarullo; Mary Miller, the Treasury Department’s undersecretary for domestic finance; Federal Deposit Insurance Corp. chairman Martin Gruenberg; and Comptroller of the Currency Thomas Curry were called before the senate panel for a hearing on Thursday for an update of the regulatory overhaul that began in 2010.
In the hearing, financial regulators assured the measures of Dodd-Frank designed to prevent a repeat of the global credit crisis will mostly be finished by the end of 2013.
In his written testimony, Tarullo wrote, "The deliberate pace and multi-pronged nature of the implementation of the act — occasioned as it is by complicated issues and decision-making processes — may be obscuring what will be far-reaching changes in the regulation of financial firms and markets. Indeed, the Federal Reserve and other banking supervisors have already created a very different supervisory environment than what was prevalent just a few years ago."
To the Senate Banking Committee, Miller with the Treasury Department said, "We expect to approach the point of substantial completion of implementation of the Dodd-Frank Act. That does not mean we will be able to relax our guard."
The Treasury undersecretary added that regulators will still be required to be flexible and to stand ready to address new threats to the financial system.
Earlier this week, the majority of policymakers approved the final regulatory capital rules for the Basel Committee on Banking Supervision, laying the foundation for future banking institution reform. The approvals occurred at an open meeting held by the FDIC to finalize Basel III rules already approved by the Federal Reserve.
The FDIC board also approved a capital interim final rule and the Office of the Comptroller of the Currency approved a final capital rule identical in substance to the final rules issued by the Federal Reserve Board on July 2.
According to Tarullo, implementation of a risk-based capital surcharge for systemically important banks, a liquidity rule, and the Volcker rule to ban proprietary trading by banks, should be completed by the end of the year by regulators.
Tarullo added in his testimony, "With one exception, we expect to finalize the remaining proposed enhanced prudential standards around the end of the year as well. The one exception is single-counterparty credit limits."
"We are closer to the end than the beginning here," said Miller of the progress on the implementation of regulatory reforms.
In regards to the Volcker, Curry assures it will be finished in the near term.
Tarullo added, "The implementation of the Volcker Rule has taken a significant amount of time for a variety of reasons — the interpretive and policy issues implicated by the rule are complex, the completion of the Volcker Rule requires negotiations among a variety of banking and market regulators, and the potential costs of getting the Volcker Rule wrong are high."
"Banks have to prepare for implementation so they understand what’s contained in the final rule," said Gruenberg.