In this report, we build on Friday’s initial assessment of the revised restructuring plan presented by FDIC Vice Chairman Hoenig.  The new approach continues Mr. Hoenig’s efforts to redefine financial holding company (FHC) structures so that, as he initially sought (see Client Report FHC23), traditional and non-traditional FHC activities are separated.  We call this reform model “FHC-heavy” to differentiate it from proposals to reinstate a version of the Glass-Steagall Act such as the reintroduced Warren-McCain bill (see FSM Report FHC21).  Mr. Hoenig’s new proposal answers some of his initial questions – for example, he now makes clear that a ten percent leverage ratio (LR) should apply to the new FHC and its subsidiary bank intermediate holding company (BIHC) in concert with subsidiary insured depositories.  Now, though, the non-traditional IHC (NIHC) would come under an eight percent LR; a new IHC would be authorized for limited-purpose custody banks, ending the complete exemption initially proposed for them.  

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