The Federal Reserve Begins Regulating Thrift Holding Companies

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The Federal Reserve Board took its first steps last week into the world of regulating savings and loan holding companies. Under the Dodd-Frank Wall Street Reform and Consumer Protection Act, the Office of Thrift Supervision, the primary regulator for savings and loan associations and their holding companies, will cease to be an independent federal agency on July 21, 2011. On that date, the OTS will become part of the Office of the Comptroller of the Currency, the current regulator of national banks, and all regulation of savings and loan associations – or "thrifts" as they are sometimes called – will be under the auspices of the OCC.

However, the Dodd-Frank Act also mandated that regulation and supervision of savings and loan holding companies (SLHCs), previously within the purview of the OTS, be transferred to the Federal Reserve Board, which regulates and supervises bank holding companies (BHCs). On April 15, 2011, the Federal Reserve issued its first pronouncement in this area by seeking comment to a proposed Supervisory Guidance by which the Federal Reserve proposes to apply certain elements of its consolidated supervisory program for BHCs to SLHCs. This is consistent with the Federal Reserve’s long-standing concern about capital standards, liquidity and risk management at BHCs and with its oft-stated goal that a BHC and its nondepository subsidiaries should be a source of strength for, and not threaten the safety and soundness of, its depository banks.

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