Regulatory Reform 10 Years After the Financial Crisis: Systemic Risk Regulation of Non-Bank Financial Institutions

"When large, interconnected financial institutions become distressed, policymakers have historically faced a choice between (1) a taxpayer-funded bailout, and (2) the destabilization of the financial system—a dilemma that commentators have labeled the “too-big-to-fail” (TBTF) problem. The 2007-2009 financial crisis highlighted the significance of the TBTF problem. During the crisis, a number of large financial institutions experienced severe distress, and the federal government committed hundreds of billions of dollars in an effort to rescue the financial system. According to some commentators, the crisis underscored the inadequacy of existing prudential regulation of large financial institutions, and of the bankruptcy system for resolving the failure of such institutions.

In response to the crisis, Congress passed and President Obama signed the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank) in 2010. Titles I and II of Dodd-Frank are specifically directed at minimizing the systemic risk created by TBTF financial institutions. In order to minimize the risks that large financial institutions will fail, Title I of Dodd-Frank establishes an enhanced prudential regulatory regime for certain large bank holding companies and non-bank financial companies. In order to “resolve” (i.e., reorganize or liquidate) systemically important financial institutions, Title II establishes a new resolution regime available for such institutions outside of the Bankruptcy Code.."
Regulotory reform

Banking Policy Issues in the 115 th Congress

"The financial crisis and the ensuing legislative and regulatory responses greatly affected the banking industry. Many new regulations—mandated or authorized by the Dodd-Frank Wall Street Reform and Consumer Protection Act (P.L. 111-203) or promulgated under the authority of bank regulators—have been implemented in recent years. In addition, economic and technological trends continue to affect banks. As a result, Congress is faced with many issues related to the bank industry, including issues concerning prudential regulation, consumer protection, “too big to fail” (TBTF) banks, community banks, regulatory agency design and independence, and market and economic trends. For example, the Financial CHOICE Act (H.R. 10) and the Economic Growth, Regulatory Relief, and Consumer Protection Act (S. 2155) propose wide ranging changes to the financial regulatory system, and include provisions related to many of these banking issues..."

Banking policy