The Federal Deposit Insurance Corp. will officially begin implementing its new resolution authority for systemically important firms on Monday. The FDIC's board will consider an interim rule "implementing certain orderly liquidation authority provisions" of the Dodd-Frank law, the agency said. The board is also expected to consider rules on restrictions for securitized assets and implementing deposit insurance coverage provisions for transaction accounts.
Dodd-Frank gave the agency power to wind down failing bank holding companies and nonbank financial firms that the government determines could cause systemic problems if unwound through bankruptcy court. The lack of such an authority is blamed for the turmoil that followed high-profile failures in 2008.
The securitization rule deals with assets the FDIC exempts from failed-bank seizure. Such assets had enjoyed a "safe harbor" when an originator failed. But in light of securitization's role in the crisis, and new on-balance sheet reporting rules for securitizations, the FDIC in May proposed conditions on the safe harbor, including risk retention. Yet some worry the rule could conflict with similar requirements both in Dodd-Frank and a proposal by the Securities and Exchange Commission.
