Title III streamlines the supervision of depository institutions and their holding companies by abolishing the Office of Thrift Supervision (OTS) and transferring its regulatory and rulemaking authority to the Office of the Comptroller of the Currency (OCC), Federal Deposit Insurance Corporation (FDIC), and Board of Governors of the Federal Reserve System (Federal Reserve). Title III also reforms federal deposit insurance.
Title III’s purpose is to: (1) provide for the safe and sound operation of the banking system; (2) preserve and protect the dual banking system; (3) ensure fair and appropriate supervision of depository institutions, without regard to the size or type of charter; and (4) streamline the supervision of depository institutions and their holding companies. See 12 U.S.C. § 5401 (Dodd-Frank Act § 301).
Abolishment of OTS and Transfer of OTS Powers and Duties to the Federal Reserve, OCC, and FDIC
Title III abolished the OTS, which had been responsible for regulating state and federal savings associations and their holding companies. See 12 U.S.C. § 5413 (Dodd-Frank Act § 313). The OTS’s functions and powers were transferred to the OCC, FDIC, and the Federal Reserve. The Federal Reserve acquired regulatory and rulemaking authority over savings and loan holding companies. See 12 U.S.C. § 5412 (Dodd-Frank Act § 312). The OCC acquired supervisory and rulemaking authority over federal savings associations. See id. The FDIC acquired supervisory and rulemaking authority over state-chartered savings associations. See id.
Any legal action or proceeding commenced by or against the OTS before the transfer date continues after the transfer of powers with the appropriate agency substituted for the OTS. See 12 U.S.C. § 5414 (Dodd-Frank Act § 316(a)(2)). In addition, all orders, agreements, regulations, and interpretations issued by the OTS remain effective and enforceable by or against the Federal Reserve, OCC, or FDIC, as appropriate. See id. (Dodd-Frank Act § 316(b)). Any proposed OTS regulation or regulation that was not yet effective as of the transfer date is deemed to have been proposed by the appropriate agency or is effective as a regulation of the appropriate agency. See id. (Dodd-Frank Act § 316(d)).
Deposit Insurance Reform
Title III also reforms federal deposit insurance. First, the Act removed a provision in the Federal Deposit Insurance Act (FDIA), which states that no institution may be denied the lowest-risk category of insurance solely because of its size. See 12 U.S.C. § 1817(b)(2) (Dodd-Frank Act § 331). Next, the Act modified the FDIC’s assessment base used to calculate deposit insurance to reflect a risk-based system. See id. The Act then eliminated procyclical assessments. See id. (Dodd-Frank Act § 332). Further, there was a permanent increase in deposit insurance from $100,000 to $250,000. See id. (Dodd-Frank Act § 335). This new standard applies to depositors in any institution for which the FDIC was appointed as receiver or conservator on or after January 1, 2008 and before October 3, 2008. See id. The Act also increased the maximum share insurance from $100,000 to $250,000. See id.
Additionally, Title III addresses a number of miscellaneous issues. Savings associations that convert to banks may continue to operate any branch or agency that the savings association operated immediately before conversion. See 12 U.S.C. § 5451 (Dodd-Frank Act § 341). The savings association that converts to a bank may also establish, acquire, and operate additional branches at any location within any state in which the savings association operated a branch immediately before conversion, so long as the law of the state would permit establishment of the branch if the bank were a state bank charted by the state. See id.
Title III also requires the establishment of an Office of Minority and Women Inclusion at each federal agency. See 12 U.S.C. § 5452 (Dodd-Frank Act § 342(a)(1)(A)).
Finally, Title III requires the FDIC and National Credit Union Administration to fully insure the net amount that any depositor at an insured deposit institution maintains in a noninterest-bearing transaction account. See 12 U.S.C. § 1821 (Dodd-Frank Act § 343).
Pursuant to Title III, the transfer of powers to the Federal Reserve, OCC, and FDIC took effect on July 21, 2011. See 12 U.S.C. § 5411 (Dodd-Frank Act § 311). After transferring OTS powers to these other entities, the OTS ceased to exist on October 19, 2011. See Offices of Inspector General, OIG-12-046. The OCC and FDIC issued a joint notice setting out lists of OTS regulations that each agency will enforce beginning on the transfer date. The OCC, Federal Reserve, and FDIC have all issued a number of rules to incorporate the transfer of OTS powers to each agency.