Key takeaways

• Last week, the federal banking agencies issued a report, mandated by section 620 of the Dodd-Frank Act,  that discusses the activities that a “banking entity” may engage in under federal and state law, the risks associated with those activities, and recommendations to the legal framework to address these issues.
• The recommendations included in the report are sweeping, particularly many of those made by the Federal Reserve, and very well may portend an ongoing policy debate, which could lead to changes that have significant consequences for the financial system, regulated institutions and the economy.
• More specifically, the Federal Reserve recommends Congress repeal (1) merchant banking authority; (2) the grandfathered authority for certain financial holding companies to engage in commodities activities under section 4(o) of the Bank Holding Company Act; and (3) the exemptions that permit grandfathered unitary savings and loan holding companies and owners and affiliates of industrial loan companies to operate without the same restrictions on nonfinancial activities and investments that otherwise apply to owners of insured depository institutions.