Senate panel sets hearing to look at FSOC ‘designations’ of non-bank financial firms

Designations of non-bank financial firms as “systemically important” by a panel of federal regulators will be scrutinized in a March 14 Senate hearing.

The Senate Banking Committee said the hearing will focus on the designations made by the Financial Stability Oversight Council (FSOC), a group consisting of (among others) leaders of all five federal financial institution regulatory agencies. Treasury Secretary Steven Mnuchin chairs the group.

According to the committee, witnesses at the hearing (which gets underway at 10 a.m.) will include:

  • Douglas Holtz-Eakin, president, American Action Forum;
  • Paul Schott Stevens, president and CEO, Investment Company Institute;
  • Jeremy C. Kress, assistant professor of business law, University of Michigan Ross School of Business.

The 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank) charged the FSOC with the designating certain non-bank financial firms as “systemically important” if they meet a certain criterion. Under the designation, a firm with that label which faces “material financial distress” could pose a threat to U.S. financial stability, and is thus subject to supervision by the Federal Reserve and enhanced prudential standards.

Since 2015, FSOC has rescinded the designation from at least three firms: GE Capital, American International Group (AIG), and Prudential Financial, Inc.

Wednesday, FSOC will consider (at its regular meeting) proposed amendments to interpretive guidance on nonbank financial company designations as posing a risk to financial stability.

Financial Stability Oversight Council Nonbank Designations