As part of its longstanding work with the Financial Stability Oversight Council (FSOC) to construct the U.S. systemic-regulatory framework, the Federal Reserve is revisiting part of its 2011 proposed definition of “predominantly engaged in financial activities” – a key criterion for systemic designation for nonbank financial companies.1 This definition sets the tests by which the FSOC is to judge the extent to which a nonbanking company is “financial” and, thus, potentially subject to systemic regulation under all the other criteria mandated in the Dodd-Frank Act.2 The proposed revision expands the class of activities that would be measured as “financial in nature,” thus increasing the likelihood that U.S. and foreign nonbanking companies could be deemed systemic and, then, made subject to all of the rules required for systemically-important financial institutions (SIFIs).

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