FSOC - White Paper - Study & Recommendations Regarding Concentration Limits on Large Financial Companies - January 2011
Section 622 of the Dodd-Frank Act establishes a financial sector concentration limit that would prohibit a financial company from merging or consolidating with, or acquiring, another company if the resulting company’s consolidated liabilities would exceed 10 percent of the aggregate consolidated liabilities of all financial companies. This concentration limit is intended, along with a number of other provisions in the Dodd-Frank Act, to promote financial stability and address the perception that large financial institutions are “too big to fail.”
As required by the Dodd-Frank Act, the Financial Stability Oversight Council (FSOC) completed a study of the extent to which the concentration limit would affect: financial stability, moral hazard in the financial system, the efficiency and competitiveness of U.S. financial firms and financial markets, and the cost and availability of credit and other financial services to households and businesses in the United States. The study also contains the FSOC’s recommendations regarding modifications to the concentration limit to mitigate practical difficulties likely to arise in its administration and enforcement, without undermining its effectiveness in limiting excessive concentration among financial companies. These recommendations will be issued for public comment.