On November 25, a notice of proposed rulemaking was published jointly by the Federal Deposit Insurance Corporation (the FDIC) and the Departmental Offices of the Department of the Treasury (the Treasury, and collectively, the Agencies) to implement applicable provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the Dodd-Frank Act). In accordance with the requirements of the Dodd-Frank Act, the proposed rules govern the calculation of the maximum obligation limitation (MOL), as specified in section 210(n)(6) of the Dodd-Frank Act. The MOL limits the aggregate amount of outstanding obligations that the FDIC may issue or incur in connection with the orderly liquidation of a "covered financial company." Under section 201(a)(8) of the Dodd-Frank Act, a ‘‘covered financial company’’ is a ‘‘financial company’’ for which a systemic risk determination has been made pursuant to section 203(b) of the Dodd-Frank Act but does not include an insured depository institution.
Specifically, the MOL provides that the FDIC "may not, in connection with the orderly liquidation of a covered financial company, issue or incur any obligation, if, after issuing or incurring the obligation, the aggregate amount of such obligations outstanding …for each covered financial company would exceed— (A) an amount that is equal to 10 percent of the total consolidated assets of the covered financial company, based on the most recent financial statement available, during the 30- day period immediately following the date of appointment of the FDIC as receiver (or a shorter time period if the [FDIC] has calculated the amount described under subparagraph (B)); and (B) the amount that is equal to 90 percent of the fair value of the total consolidated assets of each covered financial company that are available for repayment, after the time period described in subparagraph (A)."
Section 210(n)(7) of the Dodd-Frank Act requires the Agencies, in consultation with the Financial Stability Oversight Council (FOSC) prescribe regulations governing the calculation of the MOL. In accordance with this section, the Agencies have consulted with the FSOC, and have determined that it would be most appropriate to adopt regulations that closely follow the statutory language for calculating the MOL, while defining certain terms referenced in the statute and seeking comment on those definitions. The proposed regulation thereafter defines the terms "obligations," "most recent financial statements available, "fair value," and "‘‘total consolidated assets of each covered financial company that are available for repayment.’’ In particular, the Agencies invited comments on whether the definitions proposed are appropriate.
Comments are due January 24, 2012. For more information, click here.