In addition, the Dodd-Frank Act created FSOC. Development of proposed rule. Dodd-Frank Act Regulations

Under the Dodd-Frank Act, federal financial regulatory agencies are  directed or have the authority to issue hundreds of regulations to  implement the act’s provisions. Regulatory Analyses Provide Limited Information about Benefits and Costs of Chosen or Alternative Approaches

Federal agencies conducted the regulatory analyses required by various  federal statutes for all 54 Dodd-Frank Act regulations that we reviewed. As part of their analyses, the agencies generally considered, but typically  did not quantify or monetize, the benefits and costs of these regulations. As independent regulatory agencies, the federal financial regulators are  not subject to executive orders that require comprehensive benefit-cost  analysis in accordance with guidance issued by OMB. While most  financial regulators said that they attempt to follow OMB’s guidance in  principle or spirit, we found that they did not consistently follow key  elements of the guidance in their regulatory analyses. We previously  recommended that regulators should more fully incorporate the OMB  guidance into their rulemaking policies. Regulators Were Not Required to Assess Benefits and Costs of Regulatory Alternatives

As part of their rulemakings, federal agencies generally must conduct  regulatory analysis pursuant to the Paperwork Reduction Act (PRA) and  the Regulatory Flexibility Act (RFA), among other statutes.RFA require federal agencies to assess various impacts and costs of their  rules, but do not require the agencies to formally assess the benefits and  costs of alternative regulatory approaches or the reason for selecting one  alternative over another. 12 U.S.C. Agencies issued 19 major rules. Regulators Generally Developed Selected Major Rules in Ways Consistent with the Principles, but not Certain Key Elements, of the OMB Guidance

Although independent federal financial regulators are not required to  follow OMB’s Circular A-4 when developing regulations, they told us that  they try to follow this guidance in principle or spirit. For example, CFTC and SEC did not evaluate the benefits  and costs of regulatory alternatives they considered for key provisions  compared to their chosen approach. In our previous review, we found that the policies and  procedures of these regulators did not fully reflect OMB guidance and  recommended that they incorporate the guidance more fully in their  rulemaking policies and procedures. Regulators Continue to Coordinate Informally on Rulemakings, but Differences among Related Rules Still Exist

Federal financial regulators have continued to coordinate on rulemakings  informally, but coordination may not eliminate the potential for differences  in related rules. Regulators have coordinated on 19 of the 54 substantive  regulations that we reviewed, in some cases voluntarily coordinating their  activities and also extending coordination internationally. According to  agency staff, most interagency coordination during rulemaking largely  was informal and conducted at the staff level. Regulators Coordinated as Required, and Such Coordination Involved Around One-Third of Their Dodd-Frank Regulations

We found documentation of coordination among the rulemaking agency  and other domestic or international regulators for 19 of the 54 substantive  regulations that were issued and became effective between July 21,  2011, and July 23, 2012. The act stipulated coordination for 10 other  regulations. We also reiterated our  previous recommendation by stating that FSOC should establish formal  collaboration and coordination policies for rulemaking. Although the indicators may be  suggestive of the act’s impact, our indicators do not identify causal links  between their changes and the act. Further, many other factors can affect  SIFIs and, thus, the indicators. Such provisions include (1) establishing FSOC to identify and  respond to emerging threats to the stability of the U.S. financial system;  (2) authorizing FSOC to designate a nonbank financial company for  Federal Reserve supervision if FSOC determines it could pose a threat to  the financial stability of the United States  based on the company’s size,  leverage, interconnectedness, or other factors; and (3) directing the  Federal Reserve to impose enhanced prudential standards and oversight  on bank holding companies with $50 billion or more in total consolidated  assets (referred to as bank SIFIs in this report) and nonbank financial  companies designated by FSOC (referred to as nonbank SIFIs in this  report). We developed indicators to monitor changes in some of these SIFI  characteristics. In their comments, the agencies neither agreed nor disagreed with the  report’s findings. Appendix I: Scope and Methodology

Our objectives in this report were to examine (1) the regulatory analyses,  including benefit-cost analyses, federal financial regulators have  performed to assess the potential impact of selected final rules issued  pursuant to the Dodd-Frank Act; (2) how federal financial regulators  consulted with each other in implementing selected final rules issued  pursuant to the Dodd-Frank Act to avoid duplication or conflicts; and (3)  what is known about the impact of the final Dodd-Frank Act regulations on  the financial markets. Appendix IV: Econometric Analyses of the Impact of Enhanced Regulation and Oversight on SIFIs

	Methodology

We conducted an econometric analysis to assess the impact of the Dodd- Frank Act’s new requirements for bank SIFIs on (1) the cost of credit they  provide and (2) their safety and soundness. Liquidity. These estimates suggest that the Dodd-Frank Act’s new  requirements for SIFIs have had little effect on bank SIFIs’ funding costs.
Why GAO Did This Study

The Dodd-Frank Act requires or authorizes various federal agencies to issue hundreds of rules to implement reforms intended to strengthen the financial services industry. GAO is required to annually study financial services regulations. This report examines (1) the regulatory analyses federal agencies performed for rules issued pursuant to the Dodd-Frank Act; (2) how the agencies consulted with each other in implementing the final rules to avoid duplication or conflicts; and (3) what is known about the impact of the Dodd-Frank Act rules. GAO identified 66 final Dodd-Frank Act rules in effect between July 21, 2011, and July 23, 2012. GAO examined the regulatory analyses for the 54 regulations that were substantive and thus required regulatory analyses; conducted case studies on the regulatory analyses for 4 of the 19 major rules; conducted case studies on interagency coordination for 3 other rules; and developed indicators to assess the impact of the acts systemic risk provisions and regulations.

What GAO Found

Federal agencies conducted the regulatory analyses required by various federal statutes for all 54 regulations issued pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act) that GAO reviewed. As part of their analyses, the agencies generally considered, but typically did not quantify or monetize, the benefits and costs of these rules. Most of the federal financial regulators, as independent regulatory agencies, are not subject to executive orders that require comprehensive benefit-cost analysis in accordance with guidance issued by the Office of Management and Budget (OMB). Although most financial regulators are not required to follow OMB's guidance, they told GAO that they attempt to follow it in principle or spirit. GAO's review of selected rules found that regulators did not consistently follow key elements of the OMB guidance in their regulatory analyses. For example, while some regulators identified the benefits and costs of their chosen regulatory approach in proposed rules, they did not evaluate their chosen approach compared to the benefits and costs of alternative approaches. GAO previously recommended that regulators more fully incorporate the OMB guidance into their rulemaking policies, and the Office of Comptroller of the Currency and the Securities and Exchange Commission have done so. By not more closely following OMB's guidance, other financial regulators continue to miss an opportunity to improve their analyses.
Federal financial agencies continue to coordinate on rulemakings informally in order to reduce duplication and overlap in regulations and for other purposes, but interagency coordination does not necessarily eliminate the potential for differences in related rules. Agencies coordinated on 19 of the 54 substantive regulations that GAO reviewed. For most of the 19 regulations, the Dodd-Frank Act required the agencies to coordinate, but agencies also voluntarily coordinated with other U.S. and international regulators on some of their rulemakings. According to the regulators, most interagency coordination is informal and conducted at the staff level. GAO's review of selected rules shows that differences between related rules may remain even when coordination occurs. According to regulators, such differences may result from differences in their jurisdictions or the markets. Finally, the Financial Stability Oversight Council (FSOC) has not yet implemented GAO's previous recommendation to work with regulators to establish formal interagency coordination policies.
Most Dodd-Frank Act regulations have not been finalized or in place for sufficient time for their full impacts to materialize. Recognizing these and other limitations, GAO took a multipronged approach to assess the impact of some of the act's provisions and rules, with an initial focus on the act's systemic risk goals. First, GAO developed indicators to monitor changes in certain characteristics of U.S. bank holding companies subject to enhanced prudential regulation under the Dodd-Frank Act (U.S. bank SIFIs). Although the indicators do not identify causal links between their changes and the act--and many other factors can affect SIFIs--some indicators suggest that since 2010 U.S. bank SIFIs, on average, have decreased their leverage and enhanced their liquidity. Second, empirical results of GAO's regression analysis suggest that, to date, the act may have had little effect on U.S. bank SIFIs' funding costs but may have helped improve their safety and soundness. GAO plans to update its analyses in future reports, including adding indicators for other Dodd-Frank Act provisions and regulations.

What GAO Recommends

GAO is not making new recommendations in this report but reiterates its 2011 recommendations that the federal financial regulators more fully incorporate OMBs guidance into their rulemaking policies and that FSOC work with federal financial regulators to establish formal interagency coordination policies for rulemaking. The agencies provided written and technical comments on a draft of this report, and neither agreed nor disagreed with the reports findings.