The Implications of Federal Regulation

The Federal Deposit Insurance Corporation was given authority over the few remaining state-chartered savings associations.

The Fed’s authority over companies that own a savings association is very broad, according to a former top lawyer at a federal banking regulatory agency.

According to the lawyer, Dodd-Frank gives the Fed the authority to examine these holding companies, set minimum capital and liquidity requirements, restrict or prohibit transactions between the holding company and the savings association subsidiary, establish prudential standards, require internal controls, mandate policies and procedures that must be followed, and can take enforcement actions against officers and directors of the holding company.

The OCC has similar broad authority, but only over the Federal savings association entity, and direct subsidiaries of the savings association.

The OCC cannot examine or regulate the holding company, according to the former counsel.

The Federal Deposit Insurance Corporation is similarly limited to regulating and supervising the state chartered savings association entity, the lawyer said.

Only the Fed has supervisory and regulatory authority over the parent company, which will include many of the larger insurance companies.

In an interview with The National Underwriter for an earlier story, a top official at a Federal Reserve Bank (Fed regional banks will likely be involved in overseeing insurers with thrift operations or designated as SIFI) said, “We want to develop a thoughtful and effective supervisory approach for savings and loan holding companies that are primarily engaged in insurance operations.”

The official said that, “Certainly there are similarities, but also important differences between the banking and insurance industries.

“It is incumbent upon us to understand the business strategies and risk profiles of these firms and reflect that awareness in our supervisory approach,” the official said.