At the end of December, the U.S. Federal Reserve gave the banking industry a holiday “gift”—proposed rules implementing provisions of the Dodd-Frank Act, with the goal of preventing failure of systemically important institutions. The proposal includes provisions that could have a profound effect on how boards and managements deal with risk.
The rules apply generally to bank holding companies with consolidated assets of $50 billion or more, as well as non-bank firms designated as systemically important (insurance companies and hedge funds, for example). While they don’t apply to foreign banks unless a U.S.-based subsidiary itself reaches the $50 billion threshold, the Fed will be issuing more rules for foreign banks in the coming months.
