“BPC’s Financial Regulatory Reform Initiative has found that Dodd-Frank empowered financial regulators with substantial authority and flexibility to use their tools to improve regulation and achieve better regulatory outcomes for both financial services providers and end users of those financial services. We have seen multiple examples of regulators doing just that, ranging from the Federal Deposit Insurance Corporation’s Single Point of Entry approach to the Consumer Financial Protection Bureau’s (CFPB) use of an open and transparent rulemaking process. We have also found multiple instances where regulators could have taken a better approach, such as the Volcker Rule. And, we have found several instances where additional statutory changes are required, including the need to add a chapter to the Bankruptcy Code to complement Title II of Dodd-Frank, and the desirability of an independent inspector general for the CFPB. However, our work has shown that regulators have significant tools at their disposal to get things right.
“It is clear that banks and insurance companies are fundamentally different businesses, which require substantially different capital regimes. In my opinion, Dodd-Frank gave the Federal Reserve Board the necessary authority to the tailor its capital rules for insurance companies. The law clearly supports a tailored approach for insurance companies as well as all non-bank SIFIs. Dodd-Frank envisions a less bank-centric regulatory approach to the non-banks the Board regulates after Financial Stability Oversight Council (FSOC) designation. It also empowers the FSOC as it relates to authorities as well as institutions. And, it empowers the Federal Reserve and FSOC as it relates to capital rules for non-banks such as insurers.
“If the Federal Reserve Board is unwilling, or unable, to implement the tailoring regime required in Dodd-Frank to insurance companies, I would support a legislative solution such as S. 1369 as introduced by Senators Brown and Johanns. This would be a prominent example of the inability of regulators to adhere in practice to the construct created in Dodd-Frank. Whether this signals an isolated instance or a larger problem remains to be seen. It would add credence to the already strong argument in favor of some form of dedicated federal insurance regulation that recognizes and understands the uniqueness of the insurance industry and its importance to our economy.”