Washington – Today, Congress passed the Insurance Capital Standards Clarification Act (S. 2270), legislation sponsored by Senators Sherrod Brown (D-OH), Mike Johanns (R-NE) and Susan Collins (R-ME), which amends the Dodd-Frank Act to clearly allow the Federal Reserve discretion to tailor bank-capital rules to better fit the insurance companies the Fed now regulates.
The Bipartisan Policy Center (BPC) has strongly endorsed the idea that non-bank financial companies should not be shoehorned into capital standards designed for banks. Banks and insurance companies are fundamentally different businesses and require substantially different capital regimes. Indeed, the Dodd-Frank Act gave the Federal Reserve Board the necessary authority to the tailor its capital rules for insurance companies. The law clearly intended a tailored, less bank-centric approach for all non-bank SIFIs.
“Tailoring bank capital standards to non-banks is a core element of the Dodd-Frank framework. This new legislation will help regulators better implement Dodd-Frank so that we can improve financial regulation to allow for stronger economic growth with greater financial stability and consumer safeguards,” said BPC’s Aaron Klein, who earlier testified before the Senate Banking Committee on this legislation. “I applaud Congress for taking this wise and important step.”