FDIC Creates New Divisions For Large Bank Failures And Consumer Protection

To order to carry out its responsibilities under the recently passed Dodd-Frank Wall Street Reform and Consumer Protection Act, the FDIC announced the creation of a new Office of Complex Financial Institutions (CFI) and Division of Depositor and Consumer Protection (DCP).

The Dodd-Frank Act gave the FDIC authority to implement orderly liquidation of institutions designated as “systemically important” and previously presumed to be “too big to fail”.  FDIC Chairman Sheila Bair stated that:

“The FDIC plans to vigorously implement its new authorities under the Dodd-Frank Act, which ends the presumption of ‘too big to fail’ for the largest and most complex financial institutions. The creation of our new Office of Complex Financial Institutions is a critical first step in this process.”

“The CFI will perform continuous review and oversight of bank holding companies with more than $100 billion in assets as well as non-bank financial companies designated as systemically important by the new Financial Stability Oversight Council. CFI will also be responsible for carrying out the FDIC’s new authority under the Act to implement orderly liquidations of bank holding companies and non-bank financial companies that fail. The absence of such authority exacerbated the recent financial crisis, when such firms as AIG, Lehman Brothers, and Bear Stearns became insolvent.”

The new Division of Depositor and Consumer Protection (DCP) will ensure that banks comply with new consumer protection and fair lending regulations.   Ms. Bair noted that “While Congress established the new bureau to promulgate consumer protection rules, the FDIC maintains the responsibility to enforce those rules for banks with $10 billion or less in assets and to perform its traditional depositor protection function.  DCP will also complement the activities of the new Consumer Financial Protection Bureau that is being established within the Federal Reserve.”

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