Title VIII of the Dodd-Frank Act
Title VIII of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 was enacted to mitigate systemic risk in the financial system and to promote financial stability, in part, through enhanced supervision of financial market utilities (FMUs) designated as systemically important by the Financial Stability Oversight Council (Council). FMUs are multilateral systems that provide the infrastructure for transferring, clearing, and settling payments, securities, and other financial transactions among financial institutions or between financial institutions and the system. In cases where, among other things, a failure or a disruption to the functioning of an FMU could create, or increase, the risk of significant liquidity or credit problems spreading among financial institutions or markets and thereby threaten the stability of the U.S. financial system, the FMU may be designated as systemically important by the Council under Title VIII of the Dodd-Frank Act. To date, the Council has designated eight FMUs as systemically important.
Among other things, Title VIII authorizes the Board to
- prescribe risk-management standards for designated FMUs for which the Board or another Federal banking agency is the Supervisory Agency (i.e. the Federal agency that has primary jurisdiction over a designated FMU under Federal banking, securities, or commodity futures laws) (12 U.S.C. § 5464(a)(1));
- conduct examinations of and take enforcement actions against designated FMUs for which the Board is the Supervisory Agency (12 U.S.C. § 5466(a), (c));
- consult on and participate in Title VIII examinations for designated FMUs for which another Federal agency (such as the CFTC or SEC) is the Supervisory Agency (12 U.S.C. § 5466(d));
- receive and review advance notices and notices of emergency change (collectively, "notices of material change") from designated FMUs for which the Board is the Supervisory Agency (12 U.S.C. § 5465(e));
- consult on notices of material change from designated FMUs for which another Federal agency is the Supervisory Agency (12 U.S.C. § 5465(e));
- authorize a Federal Reserve Bank to establish and maintain an account for a designated FMU and provide certain services to the designated FMU (12 U.S.C. § 5465(a)); and
- authorize a Federal Reserve Bank to pay earnings on balances maintained by or on behalf of a designated FMU in the same manner and to the same extent as the Reserve Bank may pay earnings to a depository institution under the Federal Reserve Act (12 U.S.C. § 5465(c)).
The Board adopted Regulation HH (12 C.F.R. Part 234) to implement certain statutory provisions of Title VIII. In its discussions with the CFTC and the SEC in their respective supervision of designated clearing entities, the Board will be guided by the PSR policy.