As we noted last week, Treasury’s Financial Stability Oversight Council (FSOC) has not only finalized its new systemic-designation process, but also targeted nonbank originators and servicers for near-term consideration. Here, we go deep into the new systemic framework to anticipate how FSOC may now proceed. As before, we expect activity-and-practice designation that leads to near-term liquidity buffers for big banks and servicing backstops at the GSEs. However, one-off designations for the largest nonbanks are also possible, although not probable.
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