FDIC Chief Reveals Global Capital Index

To illustrate this point, a colleague and I at the FDIC have constructed the Global Capital Index, which shows the tangible capital levels for each of the largest global banking firms and the average levels for different size groups of US banks. – Thomas M. Hoenig, Vice Chairman of FDIC, from A Conversation about Regulatory Relief and the Community Bank

Thomas Hoenig from Gannett
Thomas Hoenig from Gannett

On April 15th Hoenig revealed that the Dodd-Frank Act is a burden that might not be necessary for banks that did not and cannot cause a crash like that of 2008 Financial Crisis. He’s leading FDIC’s effort to propose regulatory relief to banks that:

  1. banks that hold, effectively, zero trading assets or liabilities;
  2. banks that hold no derivative positions other than interest rate swaps and foreign exchange derivatives; and
  3. banks whose total notional value of all their derivatives exposures – including cleared and non-cleared derivatives – is less than $3 billion.

Effectively, community banks are the only institutions that apply. (Credit Unions are not insured by the FDIC and are insured by the National Credit Union Administration (NCUS)).

For the whole text of the Hoenig’s speech outlining the regulatory relief proposal, go to this link.


About the Author: Marcus Maltempo is a compliance professional with more than a decade of experience helping banks, law firms and clients manage investigations and regulatory responses. He is the author of the forthcoming book History of Money Laundering: How Criminals Got Paid And Got Away.


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Wall Street Is Caving In

GE in the news from Bing
GE from Bing News

GE announced that it will spin off its real estate portfolio and private equity. Last year, it spun off its consumer banking business. What remains is commercial banking.

This type of segregation through divestiture and sale is exactly what Dodd-Frank wanted to Wall Street firms to do but didn’t say so directly in the law. Dodd-Frank, the landmark legislation that requires, among other things, to segregate investment banking activities with commercial banking activities. This, in effect, undoes Gramm-Leach-Bliley and reinstates Glass-Steagall. Or, in plain speak, commercial banks can no longer have investment banking operations and must focus on lending products with depository funds.

For GE, this makes sense. It was a weird mix of businesses when CEO Jeff Immelt took over. Such conglomerates were out of favor for all the right reasons. When people can choose to buy equities of companies in a mix of their own choosing, why would a company need to have a broadcasting business, medical devices, commercial lending, credit cards, mortgage banking, healthcare financing, airplane capital leasing, home appliances and grand licensing businesses? I’m sure I am missing other businesses as well.

Immelt is keeping the commercial banking business of GE Capital because it is in line with other businesses GE has kept over the years. But this means the business has shrunk immensely and quickly, from $363 Billion to $90 Billion. At its peak, it was $538 Billion in 2008.

Shareholders are generally in favor of this. The real question is how Immelt intends to deploy the funds from sale of businesses? But that’s for another blog. For Money Compliance Blog, Immelt has made the decision that Congress wanted to make. Will others cave?


About the Author: Marcus Maltempo is a compliance professional with more than a decade of experience helping banks, law firms and clients manage investigations and regulatory responses.


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