Dodd-Frank News Center

Treasury makes recommendations on FSOC's designation processes

This story appeared in Bank Digest.                                   

The Treasury Department has released a report to President Donald Trump regarding the designation processes of the Financial Stability Oversight Council. The memorandum responds to the Presidential Memorandum issued on April 21, 2017, and makes recommendations on ways to improve the FSOC's processes for nonbank financial company and financial market utility designations.                                  

The report identifies five policy goals that should be achieved by the FSOC's designation processes: (1) leveraging the expertise of primary financial regulatory agencies; (2) promoting market discipline; (3) maintaining a level playing field among firms; (4) appropriately tailoring regulations to minimize burdens; and (5) ensuring the FSOC's designation analyses are rigorous, clear, and transparent.

FSOC updates information on SIFI designations; releases member views on AIG rescission

This story appeared in Bank Digest.                           

The Financial Stability Oversight Council has updated its general information on nonbank financial company designations to reflect its rescission of the designation of American International Group, Inc., as a systemically important financial institution. The FSOC is authorized to make such designations under the Dodd-Frank Act if it determines that a nonbank financial company's material financial distress--or the nature, scope, size, scale, concentration, interconnectedness, or mix of its activities--could pose a threat to U.S. financial stability. Such companies are subject to consolidated supervision by the Federal Reserve Board and enhanced prudential standards.

The FSOC has also released a document presenting views of Council members regarding the rescission of the AIG designation.

 

FSOC rescinds AIG nonbank financial company designation

This story appeared in Bank Digest.                                  

The Financial Stability Oversight Council announced that it has rescinded its determination that material financial distress at American International Group, Inc. (AIG) could pose a threat to U.S. financial stability and that AIG would be subject to supervision by the Board of Governors and enhanced prudential standards. The Dodd-Frank Act requires the Council to reevaluate its nonbank financial company determinations at last annually.

House passes Financial Stability Oversight Council Insurance Member Continuity Act

This story appeared in Bank Digest.                                  

The House of Representatives has passed the Financial Stability Oversight Council Insurance Member Continuity Act (H.R. 3110) by a vote of 407 to 1. The bill, which was introduced by Reps. Randy Hultgren (R-Ill) and Maxine Waters (D-Calif), is intended to strengthen the work of the Financial Stability Oversight Council by permitting its independent member with insurance expertise to continue serving in the position beyond his or her term, according to Hultgren's press release.                                  

The release said that under the Dodd-Frank Act, it is currently unclear if someone can serve as the FSOC independent member with insurance expertise once the individual's term expires. The bill would allow this individual to remain past his or her term for the earlier of either: (1) 18 months; or (2) when a successor is confirmed.        

FSOC meeting announced

This story appeared in Bank Digest.                

Treasury Secretary Steve Mnuchin will preside over an executive (closed) session of the Financial Stability Oversight Council at the Treasury Department on Monday, May 8, 2017. According to a Treasury Department press release, the preliminary agenda includes a discussion of the April 21, 2017, presidential memorandum on Council designations; an update on the annual reevaluation of the designation of a nonbank financial company; a discussion of interagency regulatory collaboration and the Feb. 3, 2017, executive order on core principles for financial regulation; a discussion of the FSOC's 2017 annual report; and an update on bank holding companies' living wills and resolution planning.

Republican senators urge Mnuchin to end 'too big to fail' policies

This story appeared in Bank Digest.

Senator Tim Scott (R-SC) and nine other Republican senators have sent a letter to Treasury Secretary Steven Mnuchin urging him to review the Financial Stability Oversight Council's process for designating nonbank financial companies as systemically important financial institutions, subject to supervision by the Federal Reserve Board and enhanced prudential standards. The senators said this process "lacks transparency and accountability, insufficiently tracks data, and does not have a consistent methodology for determinations."

According to the letter, this process has created "substantial new regulatory costs" that ultimately make American companies less competitive around the world. The senators said Mnuchin had "our strong support for using all the tools available as Secretary of Treasury to end 'Too Big To Fail' and ensure that hard-working Americans are not responsible for any new bailouts."

Emmer reintroduces Financial Stability Oversight Council Reform Act

This story appeared in Bank Digest.

Representative Tom Emmer (R-Minn) has reintroduced the Financial Stability Oversight Council Reform Act (H.R. 1459), which is intended to increase oversight, transparency, and accountability by subjecting the FSOC to the congressional appropriations process. Emmer's press release said the bill would give Congress the power to approve the budget for the FSOC and the Office of Financial Research, create quarterly reporting requirements for the OFR, and require the OFR to provide at least a 90-day public notice and comment period before issuing any report, rule, or regulation.

According to Emmer, "A recent review conducted by the Financial Services Committee highlighted the 'arbitrary and inconsistent' nature of the FSOC's actions and reiterated the need for improved oversight and review of our federal regulators."

Financial Services Committee Republican staff reports on FSOC nonbank designation process

This story appeared in Bank Digest.

The Republican staff of the House Financial Services Committee has released a report entitled "The Arbitrary and Inconsistent FSOC Nonbank Designation Process," which contends that the Financial Stability Oversight Council acts inconsistently and arbitrarily in exercising its power to designate certain nonbank companies as "too big to fail." The report is based on documents requested by the committee nearly two years ago and the sworn testimony of Treasury Department officials.

According to a committee press release, the report details the non-public analysis associated with the FSOC's processes to designate certain firms as "systemically important financial institutions" and therefore "too big to fail." Committee Chairman Jeb Hensarling said, "The release of this staff report brings some much-needed transparency and oversight to FSOC, and the information contained in the documents clearly demonstrates the need for the accountability reforms Republican have proposed in the Financial CHOICE Act."

House votes to remove threshold for designating SIFIs

This story appeared in Bank Digest.

The House of Representatives has passed the Systemic Risk Designation Improvement Act (H.R. 6392), which is intended to better gauge and more accurately reflect the potential risks that financial institutions could pose to the economy. It would remove a threshold included in the Dodd-Frank Act under which a financial instruction is automatically designated as a systemically important financial institution if it has at least $50 billion in assets and would replace it with an evaluative process that takes into account factors other than size, including complexity and interconnectedness. The House voted to approve the bill by a vote of 254-161.

House Majority Leader Kevin McCarthy (R-Calif) said the threshold "is a prime example of the arbitrariness" of the Dodd-Frank Act and that the bill "fixes one of the many overreaching errors in Dodd-Frank so we can actually protect the American people from future financial crises."

In contrast, House Financial Services Committee Ranking Member Maxine Waters (D-Calif) called the bill "the first step in the Trump agenda to deregulate Wall Street, despite candidate Trump's pledges to hold elite bankers accountable."

Brown issues statement on MetLife's challenge of its SIFI designation

This story appeared in Bank Digest.

Senate Banking Committee Ranking Member Sherrod Brown (D-Ohio) has issued a statement regarding MetLife Inc.'s challenge of its designation by the Financial Stability Oversight Council as a systemically important financial institution, on which the U.S. Court of Appeals for the District of Columbia Circuit was scheduled to hear oral arguments. Brown said the FSOC was created "so U.S. taxpayers are never again forced to bail out 'too-big-to-fail' financial companies" and that "actions that could undermine or hamstring that important oversight mission--whether by a court or by Congress--are steps in the wrong direction."