Analyze the impact of the Dodd-Frank Act, the Sarbanes-Oxley Act, and similar federal policies on the current regulatory environment.


impact of the Dodd-Frank Act

Prepare an evidence-based business report (3-5 pages) that explains how relevant regulatory considerations impact a bank’s business strategy and supplies recommendations for navigating the current regulatory environment.

Introduction

This assessment will give you the opportunity to serve as economic adviser to a bank seeking recommendations for navigating the current regulatory environment.

Banks face a number of costly mandatory regulations. For example, banks need to make sure they are in compliance with the Dodd-Frank Act and Basel III. In December 2011, the U.S. Federal Reserve announced that it would implement most of the Basel III rules. Under Basel III, banks need to meet certain leverage ratios and maintain minimum capital requirements. Specially, under Basel III compared to under Basel I and Basel II, the Common Equity Tier 1 capital ratio increased from 4 percent to 4.5 percent, and the minimum Tier 1 capital jumped from 4 percent to 6 percent. The overall regulatory capital did not change at 8 percent. The leverage ratio (which is calculated as Tier 1 capital divided by the total of on- and off-balance assets minus intangible assets) can be no more than 3 percent. Under the Dodd-Frank Act, banks are required to conduct annual financial stress tests. The Sarbanes-Oxley Act is of particular interest to publicly traded banks.

Scenario

You are an economic analyst specializing in banking regulations at a consulting firm that advises a variety of client organizations, including investment firms, commercial banks, and policy advocates. Your immediate supervisor has approached you with two potential clients who need help understanding and navigating current regulatory considerations. Choose only one (not both) of the following clients to advise:

  1. Midwest Global Investments Bank is currently private but interested in going public. They want to know the challenges posed by the current regulatory environment and recommendations for how to navigate them.
  2. American Central Bank would like to change the capital requirements they are required to maintain. They want to know the challenges posed by the current regulatory environment and recommendations for how to navigate them.

Your Role

You are an economic analyst specializing in banking regulations at a consulting firm that advises a variety of client organizations, including investment firms, commercial banks, and policy advocates.

Requirements

Address the following in an evidence-based business report for the client bank you selected above:

  1. Analyze the impact of the Dodd-Frank Act, the Sarbanes-Oxley Act, and similar federal policies on the current regulatory environment.
    • Discuss conflicting evidence and/or multiple perspectives to provide richer context.
  2. Analyze the economic implications of operating in a specific banking sector, such as commercial banking, investment banking, or others.
    • Explain the pros and cons of the economic implications for your client bank.
  3. Explain how regulatory considerations impact a specific banking sector, such as commercial banking, investment banking, or others.
    • Explain the pros and cons of these regulatory considerations for different stakeholders.
  4. Explain how legal, accounting, and other administrative costs that address regulation might impact a firm’s business strategy.
    • Explain how the bank’s business strategy may be evaluated and adjusted in the future.



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