WASHINGTON (Reuters) - The landmark financial reform legislation that President Barack Obama signed into law on Wednesday will take years to implement, with hundreds of new rules to be written and dozens of authorities transferred between agencies - some of which must be created from scratch.
Below is a rough timeline for benchmarks in the implementation from the date of enactment, based on information from Treasury officials and stipulations in the 2,300-page law itself.
— Authority to seize and liquidate large troubled financial firms is immediately granted to the Federal Deposit Insurance Corp, in consultation with the new Financial Stability Oversight Council, or FSOC, headed by Treasury Secretary Timothy Geithner.
— The FSOC, which includes the heads of all major surviving financial regulators, plus an independent member appointed by Obama, is formed immediately. It can begin work to determine which firms are systemically important and subject to higher capital requirements.
— The Treasury relinquishes the ability to authorize new bailouts from the $700 billion Troubled Asset Relief Program. Funds already distributed do not have to be immediately repaid, and funds already allocated, such as the remainder of $50 billion in mortgage relief funds, can still be used.
— The Treasury immediately authorizes the Federal Insurance Office to begin work, with an initial staff of around 10 to 15 people. The office will advise the FSOC on systemic risks in the insurance sector and help negotiate international agreements on insurance.
— Investors are allowed to sue credit rating agencies as Moody’s Corp, Standard & Poor’s and Fitch Ratings if they “recklessly” failed to review information in developing a rating.
— The Treasury, in consultation with regulators, must set a start-up date for the new Consumer Financial Protection Bureau and the transfer of consumer authorities from existing agencies. Treasury officials expect this start-up date to be no later than one year after enactment.
President Obama must nominate a director for the bureau, which is expected soon. Until the director is confirmed by the U.S. Senate, Geithner has authority to make decisions for the bureau, which will need office space, desks, information technology systems and staffing. At least some of its employees will come from other regulators, officials say.
— FSOC must hold its first meeting. For this to happen, Treasury, working with other surviving regulators, must establish rules and bylaws. The new council will replace the President’s Working Group on Financial Markets, and will take over any remaining PWG work.
— The Commodity Futures Trading Commission must publish an “interim final rule” for how to report data for swaps that predate the reform act. It also must establish timelines on how new swap trades will be reported.
— The Securities and Exchange Commission must enact new “say on pay” rules for public company compensation and golden parachutes. After this date at any public company shareholder meeting, shareholders must be allowed to vote on how frequently they will be given the opportunity to hold advisory votes on company pay.
— Regulators must adopt rules requiring securitizers to retain at least 5 percent of the credit risk in any asset they securitize, with exceptions for certain residential mortgages.
— The Federal Reserve must promulgate rules for limiting the fees that debit card issuers can charge merchants.
— The CFTC must establish protections for whistleblowers related to over-the-counter derivatives under the act.
— Consumer Financial Protection Bureau is expected to assume its full authorities and staffing.
— Office of the Comptroller of the Currency is expected to assume full authorities and personnel from the Office of Thrift Supervision.
— Deadline for new rules governing the bulk of derivatives requirements, what types of swaps are required to be cleared, basic rules and standards for clearinghouses and exchange trading of derivatives, and capital and margin requirements for dealers.
— Deadline for regulators to determine whether to exempt small banks, savings associations, farm credit institutions from the new rules on swaps, which require banks to spin off some swaps dealing operations.
— Deadline for SEC rules for mandatory registration of investment advisers to hedge funds and other private pools of capital with assets exceeding $150 million.
— Deadline for SEC adoption of rules requiring all publicly traded companies to have an independent compensation committee.
— The Treasury expects its new Office of Financial Research to be operational, analyzing data on systemic risks in the financial system.
— SEC’s Office of the Investor Advocate is expected to submit its first annual report to Congress.
— Some “Volcker Rule” provisions must be in place, such as limits on scope and scale and limits on mergers and acquisitions that expand a bank’s aggregate liabilities by more than 10 percent.
— Federal Reserve must issue must issue rules that limit debt to equity ratios to no more than 15:1 for large financial institutions; new rules also due for higher risk-based capital requirements.
— Annual stress tests must begin for financial institution with more than $10 billion in assets.
— Rules due for financial institution “living wills” that offer investors credible plans for wind-downs of firms that get into trouble.
— Rules for foreign remittances and resolutions for errors in these transfers are required to be in place.
— “Volcker Rule” provisions restricting banks from “proprietary trading activities” must be in place. These also allow banks to invest only up to 3 percent of their Tier 1 capital in hedge and private equity funds.
— Report and rulemaking on contingent capital for financial institutions due.
— Simplified mortgage disclosure rules must be in place. This is based on a requirement of one year after transfer of authorities of the new consumer agency, which the Treasury expects to be fully up and running by one year after enactment.
— Deadline for SEC to produce a study to mitigate conflicts of interests at the biggest ratings agencies. If the SEC does not find a solution, the regulator is required to implement a proposal by Senator Al Franken to create a board to match rating agencies with debt issuers.
— Banks with more than $15 billion in assets will have to strip trust preferred securities from their Tier 1 capital.
Reporting by David Lawder; Editing by David Alexander