Dodd–Frank Wall Street Reform and Consumer Protection Act
WHAT IS THE DODD-FRANK WALL STREET REFORM AND CONSUMER PROTECTION ACT REGULATING THE US FINANCIAL MARKETS
The Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank) was introduced in 2010 to prevent another financial crash like the one in 2008 and to promote the financial stability of the United States.
Considered the most wide-ranging piece of financial regulation in the US since the Great Depression, Dodd-Frank introduced many new regulatory requirements for financial firms. By doing so, it sought to improve accountability and transparency, end the too big to fail mentality, protect the American taxpayer by ending bailouts, and safeguard consumers from abusive financial services practices, amongst other things.
To achieve this, the Act established new government agencies to oversee parts of the US financial system, including the Financial Stability Oversight Council, Consumer Financial Protection Bureau and SEC Office of Credit Ratings.
The size and scope of the regulatory requirements under the Dodd-Frank Act presented banks with a significant challenge, not only from a business strategy perspective but also an operational data governance viewpoint. The new regulations around banks’ investments and proprietary trading (notably the Volcker rule), the enhanced transparency rules for OTC derivatives, and the heightened accountability significantly increased the complexity and cost of financial compliance.
AMENDMENTS TO THE DODD-FRANK ACT
Amid pushback on the regulatory burden presented to small financial firms, sections of the Dodd-Frank Act were repealed in 2018. This means some smaller banks and other financial firms are now exempt from the toughest regulations (stronger capital and liquidity rules, enhanced risk management standards, living wills, etc.)
However, they are by no means exempt from all of the Dodd-Frank Act, and are required to continuously monitor and demonstrate compliance. The remaining Systemically Important Financial Institutions (SIFIs – those deemed ‘too big to fail’) remain subject to the entirety of the Dodd-Frank Act.
DODD-FRANK SUPPORTING INFORMATION