WASHINGTON (Reuters) - U.S. Senate Banking Committee Chairman Christopher Dodd has released draft legislation to overhaul financial regulation.
The 1,136-page document calls for bold changes beyond what the Obama administration and House of Representatives have proposed. Here are some of the key proposals:
CONSUMER FINANCIAL PROTECTION AGENCY:
* Backs Obama proposal to create agency to regulate credit cards, mortgages, other financial products
* Strips consumer protection duties from existing agencies, including Federal Reserve, Comptroller of the Currency, Office of Thrift Supervision, Federal Deposit Insurance Corp, National Credit Union Administration, Federal Trade Commission.
* Lets states pass tougher consumer protections, preventing federal regulations from preempting stronger state laws.
FINANCIAL STABILITY AGENCY
* New agency to police systemic risk in economy.
* Agency to discourage firms from getting too large by imposing burdens on them as they grow.
* Would empower regulators to break up large, complex companies if they pose a threat to U.S. financial stability
NEW SUPER BANK REGULATOR
* New Financial Institutions Regulatory Administration (FIRA) would have a board including FDIC chairman, Fed chairman, three presidential appointees.
* Office of Thrift Supervision and Office of the Comptroller of the Currency would be abolished.
* FIRA would strip FDIC and Fed of direct supervisory and regulatory powers over banks and bank holding companies.
RESOLUTION AUTHORITY TO UNWIND TROUBLED FINANCIAL FIRMS
* FDIC would have primary authority to dismantle troubled financial giants, while SEC would have similar authority over systemically important broker-dealers.
* Cost of unwinding a troubled firm would be recouped after rescues through assessments on other financial firms.
REGULATION OF OVER-THE-COUNTER DERIVATIVES
* Requires central clearing and exchange trading for derivatives that can be cleared and provides a role for both regulators and clearinghouses to determine which contracts should be cleared.
* Swaps not cleared through a central clearinghouse or traded on exchanges subjected to margin, capital requirements.
* All trades to be reported so that regulators can monitor potential risks.
* Advisers to hedge funds worth over $100 million will be required to register with SEC, with advisers giving information about trades and portfolios to regulators.
* States could supervise investment advisers who manage $100 million or less in assets. That increases threshold from the current $25 million.
* Creates office within Treasury Department to monitor insurance industry, coordinate international issues.
CREDIT RATING AGENCIES
* Establishes SEC Office of Credit Rating Agencies.
* Sets new rules for internal controls, independence, transparency and penalties for poor performance.
* Allows investors to sue ratings agencies for “a knowing or reckless failure to investigate or to obtain analysis from an independent source.”
Reporting by Kevin Drawbaugh, Rachelle Younglai and Karey Wutkowski; Editing by Leslie Adler
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