Financial Reform Glossary

Financial Reform Glossary

ABS – Asset-backed security. AML/CFT – Anti-money laundering and combating the financing of terrorism. Automatic IRA – Proposal that employers in business for at least 2 years that have 10 or more employees would be required to offer an automatic IRA option (with opt-out) under which regular payroll deduction contributions would be made to an IRA. A low-cost, standard type of default investment or investments would be prescribed by statute. Basel II – Basel II Capital Accord. An international bank capital accord issued by the BCBS. Updates the original international bank capital accord (Basel I), which has been in effect since 1988. Basel II seeks to improve the consistency of capital regulations internationally, make regulatory capital more risk sensitive, and promote enhanced risk-management practices among large, internationally active banking organizations. Basel II is in the process of being implemented in the U.S. BCBS – Basel Committee on Banking Supervision. A committee of the BIS. Bills itself as a forum for regular cooperation by central banks on banking supervisory matters. Purpose is to enhance understanding of key supervisory issues and improve the quality of banking supervision worldwide. Exchanges information on national supervisory issues, approaches and techniques, with a view to promoting common understanding. Also promulgates standards, including the Basel I and II Capital Accords, the Core Principles for Effective Banking Supervision and the Concordat on cross-border banking supervision. BHC – Bank holding company. Regulated by the Federal Reserve pursuant to the BHC Act. BHC Act – Bank Holding Company Act of 1956. BIS – Bank for International Settlements. An international organization that fosters international monetary and financial cooperation and serves as a bank for central banks. Committees include the BCBS, CGFS and CPSS. Hosts the FSB. Based in Basel, Switzerland. CCP – Central counterparty. Proposal to require standardized OTC derivates to clear through regulated CCPs. CDS – Credit default swap. An OTC derivative. CEA – Commodity Exchange Act. CFMA – Commodity Futures Modernization Act of 2000. Exempted OTC derivatives from regulation by CFTC and SEC. CFPA – Consumer Financial Protection Agency. A proposed new regulator with responsibility for consumer protection in credit, savings and payments markets. Would have authority to promulgate and interpret regulations under consumer

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financial services and fair lending statutes, including CRA, ECOA, FDCPA, HMDA, HOEPA and TILA, and would administer the SAFE Act. CFTC – Commodity Futures Trading Commission. CGFS – Committee on the Global Financial System. A committee of the BIS. Purpose is to identify and assess potential sources of stress in global financial markets, to further the understanding of the structural underpinnings of financial markets, and to promote improvements to the functioning and stability of these markets. Formerly known as the Euro-currency Standing Committee. Council – The FSOC. CPO – Commodity Pool Operator. CEA currently requires that funds trading in the futures markets register as CPOs and file annual financial statements with the CFTC. Over 1,300 CPOs are currently registered with the CFTC. CPSS – Committee on Payment and Settlement Systems. A committee of the BIS. Serves as a forum for central banks to monitor and analyze developments in domestic payment, settlement and clearing systems as well as in cross-border and multicurrency settlement schemes. Through the Task Force on Securities Settlement Systems established with IOSCO, issued the CPSS-IOSCO standards. CPSS-IOSCO standards – Two sets of standards issued by the Task Force on Securities Settlement Systems established jointly by the CPSS and the IOSCO: Recommendations for Securities Settlement Systems (Nov. 2001) and Recommendations for Central Counterparties (Nov. 2004). CRA – Community Reinvestment Act of 1977. Act intended to encourage banks to lend more in low- and moderate-income neighborhoods. Proposal to give CFPA authority over this area of law. The CFPA would maintain a group of examiners specially trained and certified in community development to conduct CRA examinations of larger institutions. CRAs – Credit rating agencies. Credit CARD Act of 2009 – The Credit Card Accountability Responsibility and Disclosure Act of 2009. Signed into law on May 22, 2009. credit card bank – A banking institution that primarily issues credit cards. Exempted from definition of “bank” under the BHC Act. Proposal is to regulate credit card banks as banks and the companies that own them as BHCs under the BHC Act. CSEs – Consolidated supervised entities. Formerly supervised by SEC’s CSE Program. CSE Program – The SEC’s program supervising CSEs. Required as part of the GLB Act. Designed for the largest securities firms. Required supervised entities to submit to SEC examination and comply with SEC requirements on reporting, capital, risk management and recordkeeping. Abandoned in the Fall of 2008 after the failure of Bear Stearns and Lehman Brothers, the acquisition of Merrill Lynch and the transformation of Goldman Sachs and Morgan Stanley into BHCs. DOJ – U.S. Department of Justice.

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ECOA – Equal Credit Opportunity Act. FASB – Financial Accounting Standards Board. An accounting standards setting body. FATF – Financial Action Task Force. An inter-governmental body whose purpose is the development and promotion of national and international policies in the AML/CFT area. FCAG – Financial Crisis Advisory Group. A high-level advisory group established by the FASB and IASB in December 2008. Comprised of senior leaders with broad international experience in financial markets, the primary function of the FCAG is to advise the FASB and IASB about standard-setting implications of the global financial crisis and potential changes to the global regulatory environment. FCCC – Financial Consumer Coordinating Council. Proposed coordinating council comprised of the heads of the SEC, FTC, DOJ and CFPA, and other state and federal agencies. Would meet at least quarterly to identify gaps in consumer protection across financial products and facilitate coordination of consumer protection efforts. FDCPA – Fair Debt Collection Practices Act. FDIC – Federal Deposit Insurance Corporation. FDICIA – Federal Deposit Insurance Corporation Improvement Act of 1991. Implemented prompt corrective action. Federal Reserve – Board of Governors of the Federal Reserve System. FHC – Financial holding company. The GLB Act permitted eligible BHCs to elect to be regulated as FHCs. Becoming an FHC made it easier for BHCs to engage in insurance and securities activities. FHFA – Federal Housing Finance Agency. Regulates Fannie Mae, Freddie Mac and the FHLBS. FHLB – A Federal Home Loan Bank. One of 12 FHLBs that comprise the FHLBS. FHLBS – Federal Home Loan Bank System. A system of 12 FHLBs owned by regulated financial institutions. Provides low-cost credit to financial institutions. The FHLBS is regulated by the FHFA. FINRA – Financial Industry Regulatory Authority. SRO for U.S. securities firms. Formed by combination of SRO functions previously performed by the NASD and NYSE. FSB – Financial Stability Board. Established to address vulnerabilities and to develop and implement strong regulatory, supervisory and other policies in the interest of financial stability. Membership includes all G-20 members. Hosted by BIS. Formerly the FSF. FSF – Financial Stability Forum. Now the FSB. FSOC – Financial Services Oversight Council. A proposed new council of regulators responsible for identifying emerging systemic risks and improving interagency 6/17/09 v.1

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cooperation. Chaired by the Secretary of the Treasury. Other members would include heads of the Board of Governors of the Federal Reserve System, NBS, CFPA, SEC, CFTC, FDIC and FHFA. FTC – Federal Trade Commission. Proposal is that the FTC’s primary authority for financial product and services protections will be transferred to the CFPA, but the FTC will retain backup authority with the CFPA for statutes for which FTC currently has jurisdiction. FTC will also retain authority, shared with the CFPA, for dealing with fraud in the financial marketplace. GAAP – U.S. generally accepted accounting principles. Adopted by FASB, with public companies subject to additional accounting standards adopted by the SEC. GLB Act – Gramm-Leach-Bliley Financial Services Modernization Act of 1999. Eliminated many of the Glass-Steagall Act of 1933’s remaining restrictions separating commercial banks, investment banks and insurance companies. GSE – Government-sponsored enterprise. Includes Fannie Mae and Freddie Mac. G-20 – The Group of Twenty (G-20) Finance Ministers and Central Bank Governors. Established in 1999 to bring together systemically important industrialized and developing economies to discuss key issues in the global economy. HERA – Housing and Economic Recovery Act of 2008. Created FHFA to regulate Fannie Mae, Freddie Mac and the FHLBS. HMDA – Home Mortgage Disclosure Act. HOEPA – Home Ownership and Equity Protection Act. HOLA – Home Owners’ Loan Act of 1933. Set up the thrift system that is now proposed to be dismantled. HUD – Department of Housing and Urban Development. IAC – The SEC’s Investor Advisory Committee. Recently established. A group of investors that will advise the SEC on its regulatory priorities, including issues concerning new products, trading strategies, fee structures and effectiveness of disclosure. IAIS – International Association of Insurance Supervisors. Membership includes insurance regulators and supervisors of over 190 jurisdictions. IASB – International Accounting Standards Board. An accounting standards setting body. Formerly the International Accounting Standards Committee (IASC). ICRG – International Co-operation Review Group. Part of the FATF. IFRS – International Financial Reporting Standards. Adopted by the IASB. Expected to replace GAAP in the U.S. for SEC reporting companies. Formerly the International Accounting Standards (IAS).

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ILC – Industrial loan company. Exempted from definition of “bank” under the BHC Act. Proposal is to regulate ILCs as banks and the companies that own them as BHCs under the BHC Act. IMF – International Monetary Fund. An international organization of 185 countries that promotes international monetary cooperation and exchange rate stability, facilitates the balanced growth of international trade and provides resources to help members with balance of payments difficulties and poverty reduction. IOSCO – International Organization of Securities Commissions. An international association of securities regulators based in Madrid, Spain. Promulgated the CPSSIOSCO Standards and the IOSCO Code of Conduct Fundamentals for CRAs. MBS – Mortgage-backed security. A type of ABS. MMF – Money market mutual fund. Regulated by the SEC. Proposal for PWG to prepare a report addressing systemic risk concerns with MMFs. NBS – National Bank Supervisor. A single proposed regulator for all federally chartered depository institutions and all federal branches and agencies of foreign banks. Would inherit the OCC’s and OTS’s authority. NCUA – National Credit Union Administration. Responsible for regulating credit unions. nonbank bank – A depository institution that, as a result of 1987 amendments to the BHC Act, was added to the definition of “bank” under that Act. Companies that owned nonbank banks at the time of the 1987 amendments were grandfathered and not treated as BHCs. Proposal is to end the grandfathering, subjecting companies that own nonbank banks to regulation as BHCs under the BHC Act. OCC – Office of the Comptroller of the Currency. Primary regulator of national banks. To be subsumed into the NBS. ONI – Office of National Insurance. New Treasury agency that will gather information, develop expertise, negotiate international agreements and coordinate policy in the insurance sector. OTC – Over-the-counter. OTC derivatives – Derivative transactions not executed on an exchange. Proposal to require standardized OTC derivatives to clear through regulated CCPs. OTS – Office of Thrift Supervision. Primary regulator of thrifts. With the elimination of the thrift charter, to be subsumed into the NBS. PCA – Prompt corrective action. A series of provisions in FDICIA that require banking regulators to take specified corrective actions as a bank’s capital position deteriorates. PWG – The President’s Working Group on Financial Markets. Will be replaced by FSOC. RESPA – Real Estate Settlement and Procedures Act.

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SAFE Act – Secure and Fair Enforcement for Mortgage Licensing Act of 2008. SEC – Securities and Exchange Commission. SIBHC Program – The SEC’s program supervising SIBHCs. Required as part of the GLB Act. Required supervised entities to submit to SEC examination and comply with SEC requirements on reporting, capital, risk management and recordkeeping. Only one entity is currently subject to supervision under this program. Proposal is to eliminate this program in favor of consolidated supervision by the Federal Reserve. SIBHC – Supervised investment bank holding company. Supervised by the SEC’s SIBHC Program. SRO – Self-regulatory organization. TARP – Troubled Asset Relief Program. Terrorism Risk Insurance Act – Terrorism Risk Insurance Act of 2007. Provides reinsurance to insurance companies in the event of losses due to a terrorism event. Thrift Holding Company – Parent company of one or more thrift institutions. Supervised by the OTS. As proposed, would be regulated as BHCs by Federal Reserve. Tier 1 FHC – As proposed, a firm whose failure could pose a threat to financial stability due to a combination of its size, leverage and interconnectedness, regardless of whether the firm owns an insured depository institution. Could include insurance companies and hedge funds. Would be subject to consolidated supervision and regulation by the Federal Reserve. TILA – Truth in Lending Act. TRACE – FINRA’s Trade Reporting and Compliance Engine, the standard electronic trade reporting database for corporate bonds. Proposal for TRACE to include ABS. Treasury – U.S. Department of the Treasury. trust company – An institution (a) substantially all of whose deposits are in trust funds received in a bona fide fiduciary capacity, (b) that does not accept demand deposits or transaction accounts or make commercial loans and (c) does not obtain payment services or borrowing privileges from the Federal Reserve. Exempted from definition of “bank” under the BHC Act. Proposal is to regulate trust companies as banks and the companies that own them as BHCs under the BHC Act. Unitary Thrift Holding Company – A parent company of a single thrift that satisfies certain lending restrictions and other requirements. Unitary thrift holding companies are permitted to engage freely in commercial activities. As proposed, would be regulated as BHCs by Federal Reserve and would not be free to engage in commercial activities. World Bank – An international lending institution that provides low-interest loans, interest-free credits and grants to developing countries through the International Bank for Reconstruction and Development and the International Development Association. 6/17/09 v.1

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