The Federal Reserve Board today unanimously adopted amendments to Regulation A (“Final Rule”) that will limit emergency lending available in the next financial crisis. Notably, a banking and other financial institution should anticipate that emergency loans will be available only under a “broad based” program and then only to the extent that the institution is prepared to certify that it is solvent and that it has sufficient assets acceptable to pledge for any borrowing sought. The Final Rule seeks to restrict the Federal Reserve Board’s long standing “lender of last resort” authority as required by the Dodd-Frank Act and as would be required by a number of bills introduced in the current session of Congress. It raises a central question of whether limiting that authority will leave the United States more – or less -- financially stable.
This Client Alert describes the provisions of the Final Rule and their potential impact on the availability of emergency loans in the next financial crisis.