Legal Definitions - Dodd-Frank: Title III - Transfer of Powers to the Comptroller of the Currency, the Corporation, and the Board of Governors

Dodd-Frank: Title III - Transfer of Powers to the Comptroller of the Currency, the Corporation, and the Board of Governors refers to a specific section of the Dodd-Frank Wall Street Reform and Consumer Protection Act, a landmark piece of legislation passed in 2010 to reform the U.S. financial regulatory system.

Title III of the Dodd-Frank Act primarily focused on streamlining the supervision of banks and other depository institutions by eliminating a federal agency and reassigning its responsibilities. Specifically, it abolished the Office of Thrift Supervision (OTS), which previously regulated federal and state savings associations and their holding companies. The regulatory and rulemaking powers of the OTS were then transferred to three other key federal financial agencies:

• The Office of the Comptroller of the Currency (OCC), which took over supervision of federal savings associations.
• The Federal Deposit Insurance Corporation (FDIC), which assumed supervisory authority over state-chartered savings associations.
• The Board of Governors of the Federal Reserve System (Federal Reserve), which gained regulatory oversight of savings and loan holding companies.

The main goals of these transfers were to simplify the regulatory structure, ensure the safe and sound operation of the banking system, and provide consistent supervision regardless of an institution's size or charter type. Title III also introduced significant reforms to federal deposit insurance, most notably permanently increasing the standard deposit insurance coverage from $100,000 to $250,000 per depositor, per insured bank, for each ownership category. It also modified how the FDIC calculates deposit insurance assessments, moving to a more risk-based system.

Here are some examples illustrating the impact of Dodd-Frank Title III:

• Example 1: Regulatory Oversight Transfer

  Imagine "Coastal Community Savings," a federally chartered savings bank. Before Title III, Coastal Community Savings was primarily regulated by the OTS, which conducted its examinations and approved its new products. After Title III's implementation, Coastal Community Savings now falls under the direct supervisory authority of the Office of the Comptroller of the Currency (OCC). This means the OCC is now responsible for its regulatory compliance, safety and soundness examinations, and approving its operational changes.

  This example illustrates how Title III transferred the supervisory duties for federal savings associations from the abolished OTS directly to the OCC, ensuring continuous and streamlined regulatory oversight.

• Example 2: Increased Deposit Insurance Protection

  Consider a small business owner, Maria, who keeps $220,000 in her business checking account at "First National Bank." Prior to Title III, only $100,000 of Maria's deposit would have been federally insured by the FDIC if the bank failed. However, after Title III permanently raised the deposit insurance limit, her entire $220,000 is now fully protected by the FDIC, providing her with greater financial security.

  This example demonstrates one of the key deposit insurance reforms under Title III: the permanent increase in federal deposit insurance coverage from $100,000 to $250,000, offering enhanced protection for depositors.

• Example 3: Supervision of Financial Holding Companies

  "Global Financial Group" is a large corporation that owns several savings and loan institutions across different states. Before Title III, the OTS was responsible for regulating Global Financial Group as a savings and loan holding company. Following the changes, the Board of Governors of the Federal Reserve System (Federal Reserve) now oversees Global Financial Group, requiring it to submit consolidated financial reports and adhere to the Federal Reserve's regulations for large financial institutions.

  This example highlights how Title III transferred the regulatory and rulemaking authority over savings and loan holding companies to the Federal Reserve, centralizing the supervision of these complex entities under a major federal banking regulator.