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Tuesday, May 1, 2012

Parts of Dodd-Frank Proposal Do More Harm Than Good

Parts of the Federal Reserve’s proposed rule that would implement enhanced prudential standards and early remediation requirements for bank holding companies under the Dodd-Frank Act’s Sections 165 and 166 would do more harm than good, ABA and four other trade groups said in a comment letter.
[We] support a robust regulatory regime and acknowledge the need to correct for past regulatory deficiencies and gaps. Some parts of the [proposal], however, do more harm than good, potentially contributing to systemic risk rather than mitigating it and having an adverse impact on banking institutions’ customers and the broader economy.
The letter stated, among other things, that the proposed single counterparty credit concentration rules would needlessly reduce liquidity in the financial system, and the early remediation rules threaten to impose significant and nondiscretionary regulatory constraints on firms that are not warranted by an institution’s condition.

The trade groups also made numerous recommendations to reduce the proposed rule’s adverse effects.

Read the full letter.

In addition, the ABA Securities Association (ABASA), an ABA affiliate, sent separate comments on the proposal yesterday, expressing concern that the single counterparty credit limit provisions “have been proposed without due regard to harmonization with international approaches to counterparty credit limits.”

Read the full ABASA letter.

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