Implementing what Treasury Secretary Geithner called one of the most important sections of the Dodd-Frank Act, the FSOC today tried again to detail criteria that would subject nonbanks to systemic regulation and resolution. With a first “stage” for systemic consideration now based on quantitative data, markets will quickly take this NPR into account when judging prospects for any nonbank that crosses the initial thresholds. The new NPR (now supported by guidance) follows two prior efforts (see FSM Reports in the SYSTEMIC series) to designate nonbanks – efforts insurers and other nonbanks possibly subject to designation strongly opposed on grounds that the criteria were too vague. Now, the NPR as noted includes quantitative thresholds designed as a screen that would alert both firms and the broader market to potential systemic designation. However, as before, actual designation will depend on firm-specific information. Staff presentations made clear that this will be particularly important in the asset-management arena. This report analyzes the FSOC meeting and summarizes both the NPR and related discussion; an in-depth analysis of the new rule will shortly be provided to clients.
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