Systemic-Risk Determinations
Rejecting the Trump Administration’s hands-off approach to designating systemically-important nonbank financial institutions or activities and practices, the Biden Administration’s FSOC has finalized its bifurcated proposals to designate systemic entities and another laying out an analytical approach to identifying systemic risk that would then guide firm and activity designation as well as Council staff coordination with primary federal regulators. This is likely to lead to new additional systemic entity-based designations, rules, product or service prohibitions/restrictions, and/or firm-specific supervisory action. The final framework is as comprehensive as the proposal, meaning that U.S. systemic standards could extend far more widely than is now the case even if firm-specific nonbank designations are few and far between.