Dodd-Frank preserves the existing regulatory framework of the dual banking system. The one notable exception is the abolishment of the Office of Thrift Supervision (OTS). The Office of the Comptroller of the Currency (OCC) retains regulatory oversight of national banks, the Federal Reserve Board (FRB) maintains regulatory responsibility for “capital and prudential requirements” of state member bank and banking holding companies, and the Federal Deposit Insurance Corporation (FDIC) for non-member banks.
Dodd-Frank (Title I, Subtitle A) creates a new interagency council, the Financial Stability Oversight Council (FSOC), with broad “macro-regulatory oversight” of designating which nonbank institutions in need of “special supervision.” In testimony before the Senate, Federal Reserve Chairman Ben Bernanke describes how this “macroprudential approach” addressed critical gaps and weakness revealed by the financial crisis. According to Bernanke testimony, the “Federal Reserve and other financial regulatory agencies are expected to supervise financial institutions and critical infrastructures with an eye toward not only safety and soundness of each firm, but also taking into account risks to overall financial stability.”
Title II of Dodd-Frank creates the resolution authority to end “too big to fail.” This includes the requirements for resolution plans (or living wills) that will apply to systemically important non-bank financial institution (SIFI designation). Each designated SIFI is required to maintain and submit for review a periodic orderly resolution plan that the FRB and FDIC reviews for “its credibility and ability to facilitate an orderly resolution under the Bankruptcy Code.