In a final rule meant to limit the systemic effects of company failures, the Federal Deposit Insurance Corp. defined which financial firms are subject to Dodd-Frank resolutions.
Under the Dodd-Frank Act, the government has the ability to delegate the FDIC as receiver for failed financial firms that authorities regard as too complex and interconnected to be resolved through bankruptcy. Dodd-Frank reform law states, "firms with at least 85% of their consolidated revenues coming from financial activities could theoretically qualify, but called on the FDIC to define 'financial' and how a firm meets the 85% test," writes American Banker's Joe Adler.
The FDIC board clarified the final rule on Tuesday specifying that a company meets the 85% requirement if its revenues hit that threshold in either of the two most recently completed fiscal years, or if the firm's revenues are at least 85% financial. The FDIC also detailed what activities are considered "financial."
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