Question

What are some of the ways the Dodd-Frank Act changed how financial institutions operate?

Answer 1

ANS: Dodd-Frank Act is law that put a severe restrictions upon the financial institition or financial industry. This Act is dedicated towards protecting the consumers from abusive lending terms & mortagage or pledge practices by the banks. This Act became the law of land in the year 2020.

Dodd-Frank Act enable the government via adding more mechanism to regulate & enforce the law against the banks as well as towards other instititions. It obstructs the lending or financing companies from taking advantage of innocent consumers via twisted terms & conditions.

In 2011, Dodd-Frank wall street reform & consumer protection act extends its powers to the Board of Directors of Federal reserve System regarding supervision, regulation & operation of financial institution. The areas included in the Dodd-Frank Act 2010 are - Consumer prootection, Resolution Authority, Risk protection or regulation, Derivatives etc.

The Major provisions of Dodd-Frank are -

• Volcker Rule
• Consumer Financial protection Bureau
• Capital & Liquidity requirements
• Derivative regulations
• Financial stability oversight council (FSOC)

Under the Dodd-Frank Act, Financial institution & banks are required to emerge with a plan of quick shutdown if they approach bankruptcy or out of order in terms of money. In addition, they are also required to increase the amount of money that they hold reserve account.