The Board of Governors of the Federal Reserve System just issued a proposal to strengthen regulation and supervision of large bank holding companies and nonbank financial firms such as large insurers. The proposed rules are an attempt to reduce the risks of financial crises and reduce the interdependence between large institutions that have had a destabilizing effect on the economy in the past.Â
The proposal establishes requirements for capital, liquidity, credit exposure, stress testing, risk management and early remediation mandated by the Dodd-Frank Wall Street Reform and Consumer Protection Act.
The Fed proposal applies to all U.S. bank holding companies with assets of $50 billion or more and any nonbank financial firms designated by the Financial Stability Oversight Council as being important to the soundness of the U.S. financial system.Â
