As requested by the G-20 in 2011, The Financial Stability Board and International Organization of Securities Commissions (IOSCO) have moved past a methodology for global systemically-important banks (G-SIBs) and global systemically-important insurers (G-SIIs) to propose a way to designate systemic non-bank, non-insurance (NBNI) companies that are not otherwise deemed financial-market infrastructure. Targeted sectors are finance companies, securities broker-dealers, and investment funds (i.e., “collective-investment schemes,” including mutual funds, hedge funds, private-equity funds, and similar entities (but not fund managers)). Size criteria are the principal ones for designation, but other indicators – e.g., interconnectedness, complexity, substitutability, and cross-border operations would, as for other global entities, be used to differentiate systemic NBNIs from like-kind firms. The proposal focuses only on designation criteria, not suggesting also the prudential standards that would apply to covered entities. Affiliates or banking organizations engaged in operations akin to those proposed for NBNI designation are said to be outside the new designation and resulting prudential authority, but this would be the case only if the banking organization’s activities are regulated in a consolidated fashion under banking rules and, perhaps, not even then due to ambiguities in the proposed designation criteria.
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