July 20 (Reuters) - The landmark financial reform bill
expected to be signed into law by President Barack Obama on
Wednesday will take years to implement, with hundreds of new
rules to be written and dozens of authorities transferred
between agencies -- some of which must be created from
scratch.
The following is a timeline for key benchmarks in the implementation from the date of enactment, based on information from the U.S. Treasury and stipulations in the 2,300-page law itself:
IMMEDIATELY:
-- Authority to seize and liquidate large troubled financial firms is immediately granted to the Federal Deposit Insurance Corp, in consultation with Treasury Secretary Timothy Geithner. The FDIC will have to quickly develop rules and procedures for exercising this resolution authority.
-- The Financial Stability Oversight Council, which includes the heads of nine federal financial agencies plus an independent insurance member appointed by Obama, is formed and can begin work to determine which firms are systemically important. Chaired by Geithner, the council has authority to approve Federal Reserve decisions to order large, complex firms to divest operations if they are found to pose a grave threat to U.S. financial stability. It must meet within three months.
-- The Treasury relinquishes the ability to authorize new bailouts from the $700 billion Troubled Asset Relief Program. Funds already distributed do not have to be immediately repaid, and funds already allocated, such as the remainder of $50 billion in mortgage relief funds, can still be used.
-- The Federal Insurance Office is created within the Treasury. The office, with an initial staff of 10-15 people, will advise the FSOC on systemic risks in the insurance sector and help negotiate international agreements on insurance.
-- Investors are allowed to sue credit rating agencies, such as Moody's Corp, Standard & Poor's and Fitch Ratings, if they 'recklessly' fail to review information in developing a rating.
-- The Securities and Exchange Commission is granted authority to issue rules granting shareholders proxy access to nominate directors for public companies.
TWO MONTHS:
-- The Treasury, in consultation with regulators, must set a start-up date for the new Consumer Financial Protection Bureau and the transfer of consumer authorities from existing agencies. Treasury officials expect this start-up date to be no later than one year after enactment. Obama is expected to consider a director for the bureau 'fairly quickly,' according to Deputy Treasury Secretary Neal Wolin. Until the director is confirmed by the U.S. Senate, Geithner has authority to make decisions for the bureau, which will need office space, desks, information technology systems and staffing. Many employees are expected to come from the seven regulators that are transferring consumer authorities to the new agency.
THREE MONTHS:
-- FSOC must hold its first meeting. For this to happen, Treasury, working with other surviving regulators, must establish rules and bylaws. The new council will replace the President's Working Group on Financial Markets and will take over any remaining PWG work.
-- The Commodity Futures Trading Commission must publish an 'interim final rule' for how to report data for swaps that predate the reform act. It also must establish timelines on how new swap trades will be reported.
SIX MONTHS:
-- The SEC must enact new 'say on pay' rules for public company compensation and golden parachutes. After this date at any public company shareholder meeting, shareholders must be allowed to vote on how frequently they will be given the opportunity to hold advisory votes on company pay. This must be at least once every three years.
-- The Fed, FDIC, the Office of the Comptroller of the Currency and the Office of Thrift Supervision must submit a plan for shutting down OTS and transferring its authorities to OCC. The full transfer must occur one year after enactment.
NINE MONTHS:
-- Regulators must adopt rules requiring securitizers to retain at least 5 percent of the credit risk in any asset they securitize, with exceptions for certain residential mortgages.
-- The Federal Reserve must write rules for limiting the fees that debit card issuers can charge merchants to levels related to actual transaction costs. The rules may become effective up to 12 months after enactment.
-- The CFTC must establish protections for whistleblowers related to over-the-counter derivatives under the act.
ONE YEAR:
-- Consumer Financial Protection Bureau is expected to assume its full authorities and staffing. Treasury officials may try to accelerate this if they believe the agency can still meet its statutory obligations.
-- Office of the Comptroller of the Currency assumes its full authorities and personnel from the Office of Thrift Supervision, which will shut down.
-- Deadline for new rules governing the bulk of derivatives requirements, what types of swaps are required to be cleared, basic rules and standards for clearinghouses and exchange trading of derivatives, and capital and margin requirements for dealers.
-- Deadline for regulators to determine whether to exempt small banks, savings associations, farm credit institutions from the new rules on swaps, which require banks to spin off some swaps dealing operations.
-- Deadline for SEC rules for mandatory registration of investment advisers to hedge funds and other private pools of capital with assets exceeding $150 million.
-- Deadline for SEC adoption of rules requiring all publicly traded companies to have an independent compensation committee.
-- The Treasury expects its new Office of Financial Research to be operational, analyzing data on systemic risks in the financial system.
-- SEC's Office of the Investor Advocate is expected to submit its first annual report to Congress.
18 MONTHS:
-- Some 'Volcker Rule' provisions must be in place, such as limits on scope and scale and limits on mergers and acquisitions that expand a bank's aggregate liabilities by more than 10 percent.
-- Federal Reserve must issue must issue rules that limit debt to equity ratios to no more than 15:1 for large financial institutions; new rules also due for higher risk-based capital requirements.
-- Annual stress tests must begin for financial institution with more than $10 billion in assets.
-- Rules due for financial institution 'living wills' that offer investors credible plans for wind-downs of firms that get into trouble.
-- Rules for foreign remittances and resolutions for errors in these transfers are required to be in place.
TWO YEARS:
-- 'Volcker Rule' provisions restricting banks from 'proprietary trading activities' must be in place. These also allow banks to invest only up to 3 percent of their Tier 1 capital in hedge and private equity funds.
-- Deadline for the FSOC to produce a study on the benefits, costs, and feasibility of a contingent capital requirement for large, complex financial firms. After this is reported to Congress, the council may recommend that the Fed require the firms it supervises to maintain a minimum amount of contingent capital.
-- New rules for a simplified mortgage disclosure form must be in place, combining disclosures currently required under two separate laws. Must be in place one year after the Consumer Financial Protection Bureau assumes full responsibilities.
-- Deadline for SEC to produce a study to mitigate conflicts of interests at the biggest ratings agencies. If the SEC does not find a solution, the regulator is required to implement a proposal by Senator Al Franken to create a board to match rating agencies with debt issuers.
FIVE YEARS:
-- Banks with more than $15 billion in assets will be required to strip trust preferred securities from their Tier 1 capital base.
((Reporting by David Lawder; editing by Gary Crosse)) Keywords: FINANCIAL REGULATION/IMPLEMENTATION (david.lawder@thomsonreuters.com; +1-202-898-8395; Reuters Messaging: david.lawder.reuters.com@reuters.net) COPYRIGHT Copyright Thomson Reuters 2010. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.
The following is a timeline for key benchmarks in the implementation from the date of enactment, based on information from the U.S. Treasury and stipulations in the 2,300-page law itself:
IMMEDIATELY:
-- Authority to seize and liquidate large troubled financial firms is immediately granted to the Federal Deposit Insurance Corp, in consultation with Treasury Secretary Timothy Geithner. The FDIC will have to quickly develop rules and procedures for exercising this resolution authority.
-- The Financial Stability Oversight Council, which includes the heads of nine federal financial agencies plus an independent insurance member appointed by Obama, is formed and can begin work to determine which firms are systemically important. Chaired by Geithner, the council has authority to approve Federal Reserve decisions to order large, complex firms to divest operations if they are found to pose a grave threat to U.S. financial stability. It must meet within three months.
-- The Treasury relinquishes the ability to authorize new bailouts from the $700 billion Troubled Asset Relief Program. Funds already distributed do not have to be immediately repaid, and funds already allocated, such as the remainder of $50 billion in mortgage relief funds, can still be used.
-- The Federal Insurance Office is created within the Treasury. The office, with an initial staff of 10-15 people, will advise the FSOC on systemic risks in the insurance sector and help negotiate international agreements on insurance.
-- Investors are allowed to sue credit rating agencies, such as Moody's Corp, Standard & Poor's and Fitch Ratings, if they 'recklessly' fail to review information in developing a rating.
-- The Securities and Exchange Commission is granted authority to issue rules granting shareholders proxy access to nominate directors for public companies.
TWO MONTHS:
-- The Treasury, in consultation with regulators, must set a start-up date for the new Consumer Financial Protection Bureau and the transfer of consumer authorities from existing agencies. Treasury officials expect this start-up date to be no later than one year after enactment. Obama is expected to consider a director for the bureau 'fairly quickly,' according to Deputy Treasury Secretary Neal Wolin. Until the director is confirmed by the U.S. Senate, Geithner has authority to make decisions for the bureau, which will need office space, desks, information technology systems and staffing. Many employees are expected to come from the seven regulators that are transferring consumer authorities to the new agency.
THREE MONTHS:
-- FSOC must hold its first meeting. For this to happen, Treasury, working with other surviving regulators, must establish rules and bylaws. The new council will replace the President's Working Group on Financial Markets and will take over any remaining PWG work.
-- The Commodity Futures Trading Commission must publish an 'interim final rule' for how to report data for swaps that predate the reform act. It also must establish timelines on how new swap trades will be reported.
SIX MONTHS:
-- The SEC must enact new 'say on pay' rules for public company compensation and golden parachutes. After this date at any public company shareholder meeting, shareholders must be allowed to vote on how frequently they will be given the opportunity to hold advisory votes on company pay. This must be at least once every three years.
-- The Fed, FDIC, the Office of the Comptroller of the Currency and the Office of Thrift Supervision must submit a plan for shutting down OTS and transferring its authorities to OCC. The full transfer must occur one year after enactment.
NINE MONTHS:
-- Regulators must adopt rules requiring securitizers to retain at least 5 percent of the credit risk in any asset they securitize, with exceptions for certain residential mortgages.
-- The Federal Reserve must write rules for limiting the fees that debit card issuers can charge merchants to levels related to actual transaction costs. The rules may become effective up to 12 months after enactment.
-- The CFTC must establish protections for whistleblowers related to over-the-counter derivatives under the act.
ONE YEAR:
-- Consumer Financial Protection Bureau is expected to assume its full authorities and staffing. Treasury officials may try to accelerate this if they believe the agency can still meet its statutory obligations.
-- Office of the Comptroller of the Currency assumes its full authorities and personnel from the Office of Thrift Supervision, which will shut down.
-- Deadline for new rules governing the bulk of derivatives requirements, what types of swaps are required to be cleared, basic rules and standards for clearinghouses and exchange trading of derivatives, and capital and margin requirements for dealers.
-- Deadline for regulators to determine whether to exempt small banks, savings associations, farm credit institutions from the new rules on swaps, which require banks to spin off some swaps dealing operations.
-- Deadline for SEC rules for mandatory registration of investment advisers to hedge funds and other private pools of capital with assets exceeding $150 million.
-- Deadline for SEC adoption of rules requiring all publicly traded companies to have an independent compensation committee.
-- The Treasury expects its new Office of Financial Research to be operational, analyzing data on systemic risks in the financial system.
-- SEC's Office of the Investor Advocate is expected to submit its first annual report to Congress.
18 MONTHS:
-- Some 'Volcker Rule' provisions must be in place, such as limits on scope and scale and limits on mergers and acquisitions that expand a bank's aggregate liabilities by more than 10 percent.
-- Federal Reserve must issue must issue rules that limit debt to equity ratios to no more than 15:1 for large financial institutions; new rules also due for higher risk-based capital requirements.
-- Annual stress tests must begin for financial institution with more than $10 billion in assets.
-- Rules due for financial institution 'living wills' that offer investors credible plans for wind-downs of firms that get into trouble.
-- Rules for foreign remittances and resolutions for errors in these transfers are required to be in place.
TWO YEARS:
-- 'Volcker Rule' provisions restricting banks from 'proprietary trading activities' must be in place. These also allow banks to invest only up to 3 percent of their Tier 1 capital in hedge and private equity funds.
-- Deadline for the FSOC to produce a study on the benefits, costs, and feasibility of a contingent capital requirement for large, complex financial firms. After this is reported to Congress, the council may recommend that the Fed require the firms it supervises to maintain a minimum amount of contingent capital.
-- New rules for a simplified mortgage disclosure form must be in place, combining disclosures currently required under two separate laws. Must be in place one year after the Consumer Financial Protection Bureau assumes full responsibilities.
-- Deadline for SEC to produce a study to mitigate conflicts of interests at the biggest ratings agencies. If the SEC does not find a solution, the regulator is required to implement a proposal by Senator Al Franken to create a board to match rating agencies with debt issuers.
FIVE YEARS:
-- Banks with more than $15 billion in assets will be required to strip trust preferred securities from their Tier 1 capital base.
((Reporting by David Lawder; editing by Gary Crosse)) Keywords: FINANCIAL REGULATION/IMPLEMENTATION (david.lawder@thomsonreuters.com; +1-202-898-8395; Reuters Messaging: david.lawder.reuters.com@reuters.net) COPYRIGHT Copyright Thomson Reuters 2010. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.