Dodd-Frank: a year in review

Author: Edward Price | Published: 18 Dec 2015
Email a friend

Please enter a maximum of 5 recipients. Use ; to separate more than one email address.

As a busy year for Dodd-Frank implementation draws to a close, counsel in the US are considering what reforms to the law, if any, are likely in 2016.

The implementation of Dodd-Frank saw much progress in 2015, with three significant Dodd-Frank milestones this year. One is that all of the required Basel III capital standards are now locked-in on a set timeline to 2019. These main standards primarily increase Tier 1 capital and establish the counter-cyclical capital buffer. 

The second was the cementing of rules for foreign banking organisations that operate in the US, including so-called intermediate bank holding companies, and ring-fenced capital requirements.

Most important from the global perspective is the third, the implementation of the G20 and Basel Committee’s total loss absorbing capacity (TLAC) requirements.

“The interesting surprise there was the proposed requirement to issue long-term debt,” said  V Gerard Comizio, partner at Paul Hastings.

V. Gerard Comizio, partner at Paul Hastings
V Gerard Comizio,
Paul Hastings

According to Comizio, that surprise reinforced a premise of the TLAC rules, that shareholders and creditors should be the first in line for any losses. The aim of TLAC is minimising the possibility of taxpayer-funded bailouts, and tackling too big to fail.

No relief

When the 2010 Dodd-Frank Act was signed into law proponents argued for giving the legislation a chance, and revising any problems later.

That didn’t happen. Five years on, Dodd-Frank hasn’t been tweaked to provide any major adjustments or regulatory relief, said Comizio.

Instead, counting the number of implemented Dodd-Frank rules has become a mania. The Securities and Exchange Commission (SEC), Commodities Futures Trading Commission (CFTC) and US Federal Reserve websites are all well-populated with lists of the progress since 2010. Industry and counsel in the US also keep track.

But it’s an inexact science. “I think counting how many new rules are yet to come can get confused, because a number of the pieces are interrelated,” said Ireland.

One thing is clear however: the majority of Dodd-Frank rules are now in place. “You get different numbers in different places, but I’d say of the 390 or so required rulemakings there is some consensus that around 80% of the Dodd-Frank rules are out there,” said Comizio.

“Most have been finalised, but some are still sitting on the tarmac or going through the public comment process,” said Comizio.

Possible reform

That progress hasn’t stopped attempts at Dodd-Frank reform. The most prominent recent failed attempt, in 2015, was Republican Senator Richard Shelby’s Financial Regulatory Improvement Act.

The bill proposed significant changes to Dodd-Frank. It stalled under opposition from Democrats on the Senate Committee on Banking, Housing and Urban Affairs. The Bill did, however, reflect wider sentiment that Dodd-Frank needs reform.

“If you look at the webpage of the Chairman of the House Financial Services Committee, you see a lot about why the Dodd-Frank law is terrible, but not much about what otherwise needs to be done,” said Comizio.

The Committee’s chair is Republican Representative Jeb Hensarling. His efforts, and those of others, have nonetheless been noted by counsel.


  • Counsel in the US are considering what reforms to the 2010 Dodd-Frank Act are likely in 2016;
  • There were significant Dodd-Frank milestones in 2015, and significant attempts at reform;
  • It’s too soon to tell if the Volcker Rule will be revised;
  • Other areas of debate are re-defining a systemically important financial institution (SIFI) to reduce the regulatory burden on community banks;
  • 2016 is a presidential election year and any reforms to Dodd-Frank will move slowly.

“I expect to see some roll back of post-crisis regulatory requirements, but how far Dodd-Frank will be changed I don’t know,” said Ireland.

Oliver Ireland, Morrison & Foerster
Oliver Ireland,
Morrison & Foerster

“I think we will see some of its more dramatic elements revised but probably not eliminated,” Ireland said. 

Perhaps the most controversial part of the Dodd-Frank agenda is the Volcker Rule. Many counsel in the US have questioned or critiqued the rule. Many would like to see it go. But none can say when, or even if, it will be changed.

“It’s too early to say if we’ll have revisions of the Volcker Rule, which is complicated to understand and comply with,” said Oliver Ireland, partner at Morrison & Foerster. 

Community banks, Sifis

The Shelby Bill had two related themes. Providing regulatory relief to community banks and asserting that Congress set the systemically important financial institution (Sifi) threshold too low, at $50 billion in total consolidated assets. The result of a $50 billion Sifi threshold is that smaller banks face a regulatory burden that’s large relative to their size.  

“Shelby pitched $500 billion. This reform didn’t happen, and that’s significant,” said Comizio.

That’s a pretty high threshold, and would have left most banks outside the Sifi definition. But the official sector agrees: the current threshold is set too low.

“The Office of the Comptroller of the Currency (OCC) and Fed think at least $100 billion is a better number,” said Comizio.

In an interesting sign of the times, while the Federal Reserve has the power to change the Sifi threshold unilaterally, it hasn't.

“The Fed doesn’t want to wade in, because changes to Dodd-Frank are controversial and partisan at this point,” said Comizio.

"You could see a Shelby Bill on steroids"

The controversy over the Sifi threshold has extended to those bodies created by Dodd-Frank.

The authority of the Financial Stability Oversight Council (FSOC) is currently being tested by MetLife on just this issue. MetLife disagrees with FSOC’s decision that, under Dodd-Frank, the insurer should be defined as a Sifi.

“MetLife is testing FSOC’s ability to define what constitutes a Sifi, and in this case whether it can determine that an insurer is a Sifi,” said Comizio.

If Dodd-Frank itself can’t yet be changed, debates over exactly who the law should apply to will continue in 2016.

White House

Whatever reforms are made to Dodd-Frank in 2016, they won’t be rapid. 

A presidential election year rarely sees drastic shifts in US domestic policy. And a lot of appetite for reforming Dodd-Frank will depend on who wins the 2016 election. Some Democrats want to go further than Dodd-Frank. Many Republicans want the opposite: to reform, or even repeal, the law.

“If the Republicans win, they could opt to put Dodd-Frank on the table,” said Comizio. “You could see a Shelby Bill on steroids,” he added.

There is appetite among Democrats for reducing the regulatory burden on community banks. But, for now, the 2010 Dodd-Frank remains un-assailed. “The big end-of-year message is Congress wasn’t ready to pare back on Dodd-Frank,” Comizio said.

See also: