Tuesday, August 12, 2014

Dodd-Frank Implementation: Are We At the End of the Beginning, or the Beginning of the End?

With the Dodd-Frank Wall Street Reform and Consumer Protection Act having just celebrated its fourth birthday, where exactly are we in the the reform of our seemingly ever-evolving regulatory framework? In a recent paper, Dan Ryan, Chairman of the Financial Services Regulatory Practice at PricewaterhouseCoopers LLP takes a look at this very question to help us determine what is imminent, what is delayed, and what remains in limbo with regard to Dodd-Frank implementation.

Delays have become the norm in putting place the regulatory framework mandated by Dodd-Frank. Mr. Ryan, however, sees us as being at or near the half-way mark. He also reads into the statements and action of Fed Chair Yellen that she believes that more regulation is necessary, and "now seems eager to fully involve the entire Fed Board with its kick-off of a series of staff briefings to Fed governors on supervisory issues this past May."  Based on his observations, Mr. Ryan attempts to provide a basic roadmap of which regulations will be issued next and what they will look like. First in priority, Ryan sees regulatory action this year in the following four areas:

  1. Finalization of the Liquidity Coverage Ratio (LCR)
  2. Finalization of the US Supplementary Leverage Ratio
  3. Proposed rulemaking of a risk-based capital surcharge of 1% to 2.5% for US G-SIBs
  4. Proposed rulemaking regarding bank-affiliate transactions.

Ryan states that he does not anticipate regulatory action on items outside those listed above.  

Delays abound in other areas of implementation.  Ryan presents a helpful chart depicting his expectations for 2014 and rulemaking delays for 2015.  

He also provides a wealth of detail on the status and outlook of each provision in an appendix.  

In addition to prognostications regarding when Dodd-Frank regulations will be in process, Ryan also goes through each of the outstanding categories and describes what he predicts each may look like for:

  1. Capital 
    1. Supplementary Leverage Ratio
    2. G-SIB risk-based capital surcharge
    3. Long-term debt
  2. Liquidity
    1. Liquidity Coverage Ratio
    2. Wholesale funding and/or Net Stable Funding Ratio
  3.  Counterparty Transactions
    1. Affiliate transactions
    2. Single counterparty credit limits 

Despite all the uncertainty about where exactly we are in the Dodd-Frank reform process, Ryan's paper is worth a read as we keep score in the Dodd-Frank implementation game.  Regardless of whether there is light at the end of the regulatory tunnel, we certainly have our work cut out for us.  In Ryan's own words: 

"When the dust settles and the rules are finally known, the cumulative impact of all these siloed regulatory actions will have to be determined and strategically addressed."