Senator Susan Collins (R-ME) testified before two Senate Banking Committee Subcommittees yesterday to emphasis her position that Section 171 of the Dodd-Frank Act (DFA) does not direct regulators to apply bank-centric standards to insurance entities which are already regulated by the state.
Sen. Collins authored Section 171 of the DFA, commonly referred to as the "Collins Capital Standards Amendment," in order to address the "too big too fail" problem during the 2008-2009 financial crisis by requiring large financial holding companies to maintain a level of capital at least as high as that required of community banks, thereby eliminating the incentive for banks to become "too big too fail."
In her testimony, Sen. Collins stressed that Section 171 allows the federal regulators to take into account the distinctions between banking and insurance, and the implications of those distinctions for capital adequacy and that Section 171 does not direct the regulators to apply bank-centric capital standards to insurance entities which are already regulated by the states.
Because the Federal Reserve has acknowledged the important distinctions between insurance and banking, but has also repeatedly suggested it lacks authority to take those distinctions into account when implementing the consolidated capital standards required by Section 171, Sen. Collins introduced legislation, S. 2102, that would add language to Section 171 to clarify that, in establishing minimum capital requirements for holding companies on a consolidated basis, the Federal Reserve is not required to include insurers so long as the insurers are engaged in activities regulated as insurance at the state level.
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