The Financial Stability Oversight Council has launched another attempt at defining those nonbank financial companies that pose systemic risk and, thus, will be subject to Federal Reserve regulation and extensive prudential requirements dictated by the Dodd-Frank Act.  The scope of these requirements redefines the fundamental business of any nonbank subject to systemic regulation, leading to pressure on the FSOC to refine its prior proposals to provide considerably more clarity about the characteristics that could lead to systemic designation.  This NPR seeks to do so through a set of quantitative criteria that would act as a screen for FSOC consideration, criteria that can be readily discerned from public data so that, the FSOC hopes, markets and firms could differentiate possible systemic institutions even though final designation will depend on qualitative criteria and non-public information determined under follow-up FSOC examination.  The proposal also provides a process designed to afford firms both more certainty and greater right to appeal any systemic designation, as well as accompanying guidance clarifying FSOC’s authority to issue these standards and key provisions in what could become the final rule.

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