Coming Rules Could Wall Off Banks from Affiliates
By Barbara Rehm
If you know only one thing about Title VI of the Dodd-Frank Act, odds are it’s the Volcker Rule’s ban on proprietary trading. But another section of that title holds just as much potential to upend the industry — Section 608. It amps up Regulation W, which governs transactions between a bank and its subsidiaries and affiliates. Depending on how the law is implemented, this section could allow regulators to ring-fence insured depositories. “The less the insured depository can consort with the rest of its holding company, the more of a narrow bank you construct,” says Karen Shaw Petrou, managing partner of Federal Financial Analytics. “That takes you some of the way towards the more radical reform people like Elizabeth Warren, Richard Fisher and Tom Hoenig are proposing.”