The Federal Reserve Board’s Heightened Prudential Requirements for Systemically Important Financial Institutions: Initial Framework, but More Detail to Follow

In a long-awaited proposal that many consider is the heart of Dodd-Frank Act regulation, entitled “Enhanced Prudential Standards and Early Remediation Requirements for Covered Companies,” the Federal Reserve provides the initial architecture for the imposition of “more stringent” supervision and prudential standards on systemically important financial institutions. However, significant details and further construction of the framework is left to future proposals, so development of key compliance policies, infrastructure and reporting may have to wait for the integration of those future proposals into this initial framework. Financial institutions should anticipate that the Federal Reserve will not only add to this initial construct through the items that it specifically identified for future rule-making, but likely also will revise the rules over time as the Federal Reserve gains experience with coordinating the various pieces of their framework and applying the framework to large bank holding companies and non-bank financial companies.