As we noted before Labor Day, the federal banking agencies plan by year-end to propose a rule implementing the changes to the “source-of-strength” doctrine mandated by the Dodd-Frank Act (see FSM Report FHC19). In this report, we build on our initial alert to address the strategic questions raised by this doctrinal inquiry, noting in particular the pitfalls for fintech companies, structural options for diversified and non-traditional BHCs, challenges to large foreign banks, and resolution protocols and related costs. Although the source-of-strength requirement is a de facto one long accepted by BHC boards, it remains controversial and subject to continuing legal uncertainty despite the 2010 statutory change.
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