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Federal banking regulators announce methodology for determining asset size for purposes of enforcing federal consumer financial laws

On November 17, 2011, five federal banking agencies issued a Supervisory Ruling explaining how asset size for financial institutions would be determined for purposes of determining an institution’s primary regulator for federal consumer financial law.  Under Sections 1025 and 1026 of Dodd-Frank, federal consumer financial laws are to be enforced by the Bureau of Consumer Financial Protection for financial institutions whose assets exceed $10 billion, and for institutions below this threshold, such consumer laws would be enforced by the applicable prudential regulator, e.g. the FDIC, the Federal Reserve, the OCC, or the NCUA.  However, Dodd-Frank did not expressly provide how asset size would be determined.   Under the Ruling, the agencies adopted a methodology similar to what is now used to determine an institution's asset size for purposes of FDIC insurance assessments.  Under this system, an institution's size would initially be determined based on the assets set forth in its June 30, 2011 Call Report.  Afterward, an institution would remain in this class unless, over for four consecutive quarters, the institution’s Call Reports showed a different asset class.   This methodology was selected for two purposes:  (1) it would limit the risk of institutions rapidly alternating among asset classes; and (2) it followed an existing and commonly followed methodology for determining asset size. 



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