Dodd-Frank Act Regulations: Implementation Could Benefit from Additional Analyses and Coordination

GAO-12-151 Published: Nov 10, 2011. Publicly Released: Nov 10, 2011.

Highlights

The Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act) requires or authorizes various federal financial regulators to issue hundreds of rules to implement reforms intended to strengthen the financial services industry. GAO is required to annually study financial services regulations. This report examines (1) the regulatory analyses, including cost-benefit analyses, financial regulators have performed to assess the impact of selected final rules issued pursuant to the Dodd-Frank Act; (2) how financial regulators consulted with each other in implementing the selected final rules to avoid duplication or conflicts; and (3) what is known about the impact of the final rules. GAO examined the 32 final Dodd-Frank Act rules in effect as of July 21, 2011; the regulatory analyses conducted for 10 of the 32 rules that allowed for some level of agency discretion; statutes and executive orders requiring agencies to perform regulatory analysis; and studies on the impact of the Dodd-Frank Act. GAO also interviewed regulators, academics, and industry representatives..

Recommendations

Recommendations for Executive Action

Agency Affected	Recommendation	Status
Federal Deposit Insurance Corporation	In order to improve the efficiency and effectiveness of their efforts, the federal financial regulators have begun to take steps to address challenges associated with promulgating hundreds of new rules required under the Dodd-Frank Act. To strengthen the rigor and transparency of their regulatory analyses, the federal financial regulators should take steps to better ensure that the specific practices in OMB's regulatory analysis guidance are more fully incorporated into their rulemaking policies and consistently applied.	Closed – Implemented In a November 2011 report, we recommended that the Federal Deposit Insurance Corporation (FDIC) revise its rulemaking policies and procedures to more fully incorporate the specific practices in OMB's regulatory analysis guidance. On April 17, 2013, FDIC issued an updated policy statement on the development and review of FDIC regulations and policies. In the policy statement, FDIC describes specific principles in its regulatory analysis that incorporate OMB's guidance. For instance, FDIC's updated guidance states that, once the need for a regulation is determined, staff evaluates the benefits and costs based on available information and considers reasonable and possible alternatives. This... View More
National Credit Union Administration	In order to improve the efficiency and effectiveness of their efforts, the federal financial regulators have begun to take steps to address challenges associated with promulgating hundreds of new rules required under the Dodd-Frank Act. To strengthen the rigor and transparency of their regulatory analyses, the federal financial regulators should take steps to better ensure that the specific practices in OMB's regulatory analysis guidance are more fully incorporated into their rulemaking policies and consistently applied.	Closed – Implemented In May 2018, NCUA told us that it adopted a comprehensive internal policy related to the promulgation of NCUA regulations that incorporates principles outlined in OMB guidance. For example, NCUA will assess the need for regulation and consider non-regulatory alternatives to achieve the intended objectives. Also, NCUA will analyze the impact that a regulation will have and evaluate the regulation's measurable costs and benefits based on available information. We reviewed NCUA's policy and found it is responsive to our recommendation. NCUA has more fully incorporated OMB's regulatory analysis guidance into its rulemaking procedures within the context of its statutory mandate to ensure the... View More
United States Securities and Exchange Commission	In order to improve the efficiency and effectiveness of their efforts, the federal financial regulators have begun to take steps to address challenges associated with promulgating hundreds of new rules required under the Dodd-Frank Act. To strengthen the rigor and transparency of their regulatory analyses, the federal financial regulators should take steps to better ensure that the specific practices in OMB's regulatory analysis guidance are more fully incorporated into their rulemaking policies and consistently applied.	Closed – Implemented In a November 2011 report, we recommended that the United States Securities and Exchange Commission (SEC) revise its rulemaking policies and procedures to more fully incorporate the specific practices in the Office of Management and Budget's (OMB) regulatory analysis guidance. In March 2012, SEC issued revised guidance on economic analysis for SEC rules. SEC stated that, although it is not required to follow OMB's guidance, it drew on principles found therein. Specifically, the guidance directs staff to (1) clearly identify the justification for the proposed rule; (2) define a baseline against which to measure the likely economic consequences of the proposed rule; (3) identify... View More
Consumer Financial Protection Bureau	In order to improve the efficiency and effectiveness of their efforts, the federal financial regulators have begun to take steps to address challenges associated with promulgating hundreds of new rules required under the Dodd-Frank Act. To strengthen the rigor and transparency of their regulatory analyses, the federal financial regulators should take steps to better ensure that the specific practices in OMB's regulatory analysis guidance are more fully incorporated into their rulemaking policies and consistently applied.	Closed – Implemented On July 7, 2014, CFPB updated its internal policies and procedures for conducting analyses of benefits and costs that were published on an interim basis on January 9, 2012. The updated guidance states that CFPB aims to define problems carefully, consider a wide variety of options, and evaluate their benefits and costs. This general approach is consistent with the key elements of regulatory analysis defined in OMB's regulatory analysis guidance. In addition, the updated guidance notes that CFPB has unique regulatory analysis requirements under Section 1022(b)(2) of the Dodd-Frank Act. The updated guidance includes a section with guidance on the manner and methods for considering the... View More
Commodity Futures Trading Commission	In order to improve the efficiency and effectiveness of their efforts, the federal financial regulators have begun to take steps to address challenges associated with promulgating hundreds of new rules required under the Dodd-Frank Act. To strengthen the rigor and transparency of their regulatory analyses, the federal financial regulators should take steps to better ensure that the specific practices in OMB's regulatory analysis guidance are more fully incorporated into their rulemaking policies and consistently applied.	Closed – Implemented In June 2016, CFTC stated that its General Counsel and Chief Economist issued detailed written guidance in May 2011 on the consideration of costs and benefits in their rulemakings. The guidance discusses regulatory analysis in the contact of Section 15(a) of the Commodity Exchange Act, which specifies the requirements that CFTC must satisfy in considering the costs and benefits of final rulemakings. CFTC officials also stated that the guidance explicitly instructs staff considering the costs and benefits to take key aspects of OMB's regulatory analysis guidance into account, and to incorporate the principles of Executive Order 13563 to the extent reasonably feasible. In our November 2011... View More
Federal Deposit Insurance Corporation	In order to improve the efficiency and effectiveness of their efforts, the federal financial regulators have begun to take steps to address challenges associated with promulgating hundreds of new rules required under the Dodd-Frank Act. To maximize the usefulness of the required retrospective reviews, the federal financial regulatory agencies should develop plans that determine how they will measure the impact of Dodd-Frank Act regulations--for example, determining how and when to collect, analyze, and report needed data.	Closed – Implemented In a November 2011 report, we recommended that the Federal Deposit Insurance Corporation (FDIC) develop a plan for measuring the impact of the Dodd-Frank Act regulations. On April 17, 2013, FDIC published an updated policy statement on the development and review of FDIC regulations and policies. It included a section entitled "Periodic Review of Existing Regulations and Statements of Policy." In the section, FDIC described the ways in which it conducts periodic review of regulations, including (1) review in conjunction with a change to a regulation or policy statement triggered by a change in the law; (2) review at least once every ten years under the Economic Growth and Regulatory... View More
United States Securities and Exchange Commission	In order to improve the efficiency and effectiveness of their efforts, the federal financial regulators have begun to take steps to address challenges associated with promulgating hundreds of new rules required under the Dodd-Frank Act. To maximize the usefulness of the required retrospective reviews, the federal financial regulatory agencies should develop plans that determine how they will measure the impact of Dodd-Frank Act regulations--for example, determining how and when to collect, analyze, and report needed data.	Closed – Implemented In July 2016, SEC stated that it plans for retrospective reviews in three ways. First, they have general retrospective review approaches through informal and formal processes. Formal processes include Regulatory Flexibility Act reviews and formal petitions from industry and Congress. Informal processes include informal discussions with industry and Congressional representatives about challenges associated with regulations; informal comments by Commissioners about regulatory reviews; and, initiatives undertaken by staff to review regulations. Second, SEC plans for retrospective reviews through the application of guidance for economic analysis in rulemakings. The establishment of a... View More
Commodity Futures Trading Commission	In order to improve the efficiency and effectiveness of their efforts, the federal financial regulators have begun to take steps to address challenges associated with promulgating hundreds of new rules required under the Dodd-Frank Act. To maximize the usefulness of the required retrospective reviews, the federal financial regulatory agencies should develop plans that determine how they will measure the impact of Dodd-Frank Act regulations--for example, determining how and when to collect, analyze, and report needed data.	Closed – Implemented In June 2016, CFTC stated that it voluntarily created a Plan for Retrospective Review of Agency Regulations pursuant to Executive Order 13563 and published the plan in the Federal Register on June 30, 2011. In the release, CFTC stated that it intends to begin the process of the periodic, retrospective review of the remainder of its regulations (i.e., those regulations that were not reviewed as part of the Dodd-Frank effort). Therefore, CFTC officials stated that the plan will incorporate a review of Dodd-Frank rulemakings and solicit public input on which rules should be reviewed. We reviewed the plan as well as the sixth status report on implementation of the plan that was published in... View More
National Credit Union Administration	In order to improve the efficiency and effectiveness of their efforts, the federal financial regulators have begun to take steps to address challenges associated with promulgating hundreds of new rules required under the Dodd-Frank Act. To maximize the usefulness of the required retrospective reviews, the federal financial regulatory agencies should develop plans that determine how they will measure the impact of Dodd-Frank Act regulations--for example, determining how and when to collect, analyze, and report needed data.	Closed – Implemented In May 2018, NCUA adopted a comprehensive internal policy related to Promulgation of NCUA Regulations that includes an outline of NCUA's plan for retrospectively reviewing regulations. Specifically, NCUA's plan will enable the agency to determine (1) if there is a continued need for the regulation; (2) opportunities to minimize regulatory burden and clarify requirements; (3) unaddressed issues and (4) areas to expand credit union authority. In addition, NCUA's policy of reviewing one-third of its regulations each year includes a request for public comment. NCUA also voluntarily complies with the Economic Growth and Regulatory Paperwork Reduction Act of 1996, which requires publication of... View More
Consumer Financial Protection Bureau	In order to improve the efficiency and effectiveness of their efforts, the federal financial regulators have begun to take steps to address challenges associated with promulgating hundreds of new rules required under the Dodd-Frank Act. To maximize the usefulness of the required retrospective reviews, the federal financial regulatory agencies should develop plans that determine how they will measure the impact of Dodd-Frank Act regulations--for example, determining how and when to collect, analyze, and report needed data.	Closed – Implemented In a December 2013 report, we reported that CFPB is focusing on fulfilling its retrospective review requirements under section 1022 of the Dodd-Frank Act. Under the act, CFPB is required to assess retrospectively each significant rule or order adopted by CFPB under federal consumer financial law to address, among other things, the rule or order's effectiveness in meeting the act's purposes and goals. CFPB is required to publish a report of its assessment no later than 5 years after the rule or order's effective date, and is required to solicit public comment to inform its assessment. CFPB officials said that they were in the initial stage of developing a review plan, which includes... View More
Office of the Comptroller of the Currency	In order to improve the efficiency and effectiveness of their efforts, the federal financial regulators have begun to take steps to address challenges associated with promulgating hundreds of new rules required under the Dodd-Frank Act. To maximize the usefulness of the required retrospective reviews, the federal financial regulatory agencies should develop plans that determine how they will measure the impact of Dodd-Frank Act regulations--for example, determining how and when to collect, analyze, and report needed data.	Closed – Implemented In March 2017, the federal banking regulators sent Congress their report of the second Economic Growth and Regulatory Paperwork Reduction Act (EGRPRA). Under EGRPRA, the regulators must jointly conduct a review of their regulations every 10 years and consider whether any of the regulations are outdated, unnecessary, or unduly burdensome. The regulators included within their review's scope some regulations issued pursuant to the Dodd-Frank Act. To carry out the EGRPRA review, the regulators generally solicited public comments on their covered regulations through Federal Register notices and public outreach meetings. In addition to the EGRPRA reviews, OCC staff told us that the agency... View More
Financial Stability Oversight Council	Priority Rec. In order to improve the efficiency and effectiveness of their efforts, the federal financial regulators have begun to take steps to address challenges associated with promulgating hundreds of new rules required under the Dodd-Frank Act. To effectively carry out its statutory responsibilities, the FSOC should direct the Office of Financial Research to work with its members to identify and collect the data necessary to assess the impact of the Dodd-Frank Act regulations on, among other things, the stability, efficiency, and competitiveness of the U.S. financial markets.	Closed – Implemented In March 2017, Treasury noted that the President issued an executive order in February 2017, setting forth the administration's policy to regulate the U.S. financial system in a manner consistent with enabling U.S. companies to be competitive, making regulation efficient and effective, rationalizing the federal financial regulatory framework, and other core principles. The executive order instructed the Secretary of the Treasury to report within 120 days and periodically thereafter to the President on, among other things, the extent to which existing laws, regulations, and other policies promote the core principles of financial regulation and the actions that have been taken to promote... View More
Federal Reserve System	In order to improve the efficiency and effectiveness of their efforts, the federal financial regulators have begun to take steps to address challenges associated with promulgating hundreds of new rules required under the Dodd-Frank Act. To strengthen the rigor and transparency of their regulatory analyses, the federal financial regulators should take steps to better ensure that the specific practices in OMB's regulatory analysis guidance are more fully incorporated into their rulemaking policies and consistently applied.	Closed – Implemented In June 2019, Board staff told us that the agency created the Policy Assessment Group, which is composed of six economists and supporting staff, in the fall of 2017. They said that the group has actively participated in the Federal Reserve's ongoing rulemakings to ensure that the agency effectively and consistently evaluates the impacts, such as costs and benefits, of its proposed rules. Board staff also said that the agency has published more frequently supplemental quantitative analyses to help support its rulemakings, including white papers that are incorporated into the Federal Register notices or made available separately on its public website. The Policy Assessment Group should... View More
Office of the Comptroller of the Currency	In order to improve the efficiency and effectiveness of their efforts, the federal financial regulators have begun to take steps to address challenges associated with promulgating hundreds of new rules required under the Dodd-Frank Act. To strengthen the rigor and transparency of their regulatory analyses, the federal financial regulators should take steps to better ensure that the specific practices in OMB's regulatory analysis guidance are more fully incorporated into their rulemaking policies and consistently applied.	Closed – Implemented In November 2011, we recommended that the federal financial regulators, including the Office of the Comptroller of the Currency (OCC), take steps to better ensure that the specific practices in the Office of Management and Budget's (OMB) regulatory analysis guidance are more fully incorporated into their rulemaking policies and procedures. In December 2011, OCC issued a rulemaking procedures guidance that updated their procedures for economic analysis in OCC rulemaking. One of the stated purposes of the guidance is to ensure that OCC complies with the rulemaking requirements imposed by the statutes and executive orders that apply to various aspects of the rulemaking process. The OCC... View More
Federal Reserve System	In order to improve the efficiency and effectiveness of their efforts, the federal financial regulators have begun to take steps to address challenges associated with promulgating hundreds of new rules required under the Dodd-Frank Act. To maximize the usefulness of the required retrospective reviews, the federal financial regulatory agencies should develop plans that determine how they will measure the impact of Dodd-Frank Act regulations--for example, determining how and when to collect, analyze, and report needed data.	Closed – Implemented In June 2019, Board staff stated that specific reporting requirements tailored to an individual Dodd-Frank Act rule help the agency monitor compliance with the rule and provide a basis for evaluating the rule's effectiveness. For example, the Dodd-Frank Act's single-counterparty credit limits rule established reporting requirements on an institution's exposures to counterparties. According to Board staff, the agency also may use other information it collects--such as income and balance sheet data from depository institution holding companies on a quarterly basis--to assess a rule's impact. For example, the Board created the Policy Assessment Group in 2017, and the group has used data... View More
Financial Stability Oversight Council	To enhance interagency coordination on regulations issued pursuant to the Dodd-Frank Act, the FSOC should work with the federal financial regulatory agencies to establish formal coordination policies that clarify issues such as when coordination should occur, the process that will be used to solicit and address comments, and what role FSOC should play in facilitating coordination.	Closed – Implemented In June 2019, FSOC staff stated that FSOC has addressed issues concerning interagency coordination on rulemakings through its Regulation and Resolution Committee, which includes representatives from each of the federal financial regulatory agencies. Specifically, the committee meets quarterly and its duties include supporting FSOC in monitoring domestic financial regulatory proposals and serving as a forum for information sharing and coordination among FSOC members, including their staffs, as appropriate, regarding domestic financial services policy development. GAO reviewed the Regulation and Resolution Committee's meeting agendas from June 2018 to May 2019, which showed that the... View More
Federal Reserve System	To enhance interagency coordination on regulations issued pursuant to the Dodd-Frank Act, the FSOC should work with the federal financial regulatory agencies to establish formal coordination policies that clarify issues such as when coordination should occur, the process that will be used to solicit and address comments, and what role FSOC should play in facilitating coordination.	Closed – Not Implemented We made this recommendation to FSOC and its members. We have closed the recommendation as not implemented for FSOC's members but not FSOC. If FSOC implements the recommendation, it will effectively implement the recommendation for all of its members. See recommendation 16 for information on the recommendation's implementation status for FSOC.
Office of the Comptroller of the Currency	To enhance interagency coordination on regulations issued pursuant to the Dodd-Frank Act, the FSOC should work with the federal financial regulatory agencies to establish formal coordination policies that clarify issues such as when coordination should occur, the process that will be used to solicit and address comments, and what role FSOC should play in facilitating coordination.	Closed – Not Implemented We made this recommendation to FSOC and its members. We have closed the recommendation as not implemented for FSOC's members but not FSOC. If FSOC implements the recommendation, it will effectively implement the recommendation for all of its members. See recommendation 16 for information on the recommendation's implementation status for FSOC.
Consumer Financial Protection Bureau	To enhance interagency coordination on regulations issued pursuant to the Dodd-Frank Act, the FSOC should work with the federal financial regulatory agencies to establish formal coordination policies that clarify issues such as when coordination should occur, the process that will be used to solicit and address comments, and what role FSOC should play in facilitating coordination.	Closed – Implemented In March 2012, the Consumer Financial Protection Bureau (CFPB) produced internal guidance for its rulemaking consultation process. The guidance includes clarification as to when coordination should occur, noting that multiple provisions of the Dodd-Frank Act require interagency consultation and providing baseline information for rulemaking teams to consider before the rulemaking process begins. The guidance also provides the minimum steps that CFPB rulemaking teams should take during the consultation process, including briefing and solicitation of comments from agencies that are relevant to the particular rulemaking during pre-proposal, proposal, post-proposal, and final rule stages.... View More
Federal Deposit Insurance Corporation	To enhance interagency coordination on regulations issued pursuant to the Dodd-Frank Act, the FSOC should work with the federal financial regulatory agencies to establish formal coordination policies that clarify issues such as when coordination should occur, the process that will be used to solicit and address comments, and what role FSOC should play in facilitating coordination.	Closed – Implemented On April 17, 2013, FDIC published an updated policy statement on development and review of FDIC regulations and statements of policy. FDIC's updated guidance included a section describing principles for development of regulations and a policy statement. Among the principles enunciated by FDIC was that "common or overlapping statutory and supervisory requirements should be implemented by the federal financial institutions regulators in a coordinated way." FDIC noted the common statutory and supervisory requirements it has with the other federal banking regulators. FDIC also noted that some of its statutory and supervisory requirements may the overlap in either substance or in effect with... View More
United States Securities and Exchange Commission	To enhance interagency coordination on regulations issued pursuant to the Dodd-Frank Act, the FSOC should work with the federal financial regulatory agencies to establish formal coordination policies that clarify issues such as when coordination should occur, the process that will be used to solicit and address comments, and what role FSOC should play in facilitating coordination.	Closed – Not Implemented We made this recommendation to FSOC and its members. We have closed the recommendation as not implemented for FSOC's members but not FSOC. If FSOC implements the recommendation, it will effectively implement the recommendation for all of its members. See recommendation 16 for information on the recommendation's implementation status for FSOC.
Commodity Futures Trading Commission	To enhance interagency coordination on regulations issued pursuant to the Dodd-Frank Act, the FSOC should work with the federal financial regulatory agencies to establish formal coordination policies that clarify issues such as when coordination should occur, the process that will be used to solicit and address comments, and what role FSOC should play in facilitating coordination.	Closed – Not Implemented We made this recommendation to FSOC and its members. We have closed the recommendation as not implemented for FSOC's members but not FSOC. If FSOC implements the recommendation, it will effectively implement the recommendation for all of its members. See recommendation 16 for information on the recommendation's implementation status for FSOC.
National Credit Union Administration	To enhance interagency coordination on regulations issued pursuant to the Dodd-Frank Act, the FSOC should work with the federal financial regulatory agencies to establish formal coordination policies that clarify issues such as when coordination should occur, the process that will be used to solicit and address comments, and what role FSOC should play in facilitating coordination.	Closed – Not Implemented We made this recommendation to FSOC and its members. We have closed the recommendation as not implemented for FSOC's members but not FSOC. If FSOC implements the recommendation, it will effectively implement the recommendation for all of its members. See recommendation 16 for information on the recommendation's implementation status for FSOC.
Office of Financial Research	In order to improve the efficiency and effectiveness of their efforts, the federal financial regulators have begun to take steps to address challenges associated with promulgating hundreds of new rules required under the Dodd-Frank Act. To effectively carry out its statutory responsibilities, the FSOC should direct the Office of Financial Research to work with its members to identify and collect the data necessary to assess the impact of the Dodd-Frank Act regulations on, among other things, the stability, efficiency, and competitiveness of the U.S. financial markets.	Closed – Implemented In March 2017, Treasury noted that the President issued an executive order in February 2017, setting forth the administration's policy to regulate the U.S. financial system in a manner consistent with enabling U.S. companies to be competitive, making regulation efficient and effective, rationalizing the federal financial regulatory framework, and other core principles. The executive order instructed the Secretary of the Treasury to report within 120 days and periodically thereafter to the President on, among other things, the extent to which existing laws, regulations, and other policies promote the core principles of financial regulation and the actions that have been taken to promote... View More

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