The Dodd-Frank Act (DFA) authorizes the Financial Stability Oversight Council (FSOC) to designate U.S. and foreign non-bank financial companies “systemic,” based on criteria detailed in the Act. Upon designation, these firms are subjected to extensive regulation by the Federal Reserve. The scope of these rules will dramatically affect the long-term strategic outlook for any designated company, leading to capital and other standards that will dramatically redefine non-banking firms and, most likely, adversely affect profitability.  While some designated firms may reduce this impact by establishing the “intermediate holding companies” authorized in the DFA, the strategic implications will still be profound.  Should a designated firm falter, its resolution would come under the “orderly liquidation authority” also established in the DFA, creating issues for creditors and counterparties that could also immediately affect operations by systemic non-bank financial companies.

The full report is available to retainer clients.  To find out how you can sign up for the service, click here.