Insurance companies that own or operate a savings & loan will face fresh oversight from the Federal Reserve Board, which is creating a process by which to examine those financial institutions that have significant banking assets.
According to information provided by the Fed, as well as industry officials and their outside lawyers, the purpose of this new process is broad, designed to increase its own understanding of the insurance business and the differences between banking and insurance.
But more importantly, the Fed also intends to oversee thrifts operated by financial firms at the holding company level, through authority granted it under the Dodd-Frank Act.
As noted by Federal Reserve Chairman Ben Bernanke in a recent speech in New York, the main purpose is to increase federal oversight so that the oversight of large, complex financial services conglomerates – such as AIG in the run-up to the global financial crisis – does not somehow fall through the cracks will face fresh oversight from the Federal Reserve Board, which is creating a process by which to examine those financial institutions that have significant banking assets.
Memo dated July 21, 2011 from the Board of Governors, No. S.R. 11-12, outlines their plans to be the overseer of savings and loans owned by non-banks such as insurers which take deposits and conduct other banking activities.
All insurers have been re-evaluating their business model as a result of this development, prompted by the Dodd Frank Act. This act dissolved the Office of Thrift Supervision and shifted its responsibilities to the Office of the Comptroller of the Currency as charterer of savings and loans, and the Fed as overseer of thrift holding companies.
Thanks for the inputs made available by Federal Reserve Board