13 05, 2024

Karen Petrou: Why FSOC is Right to Revisit FMU Designation

2024-05-13T09:25:12-04:00May 13th, 2024|The Vault|

In the fog in which FSOC chooses to nestle, it was easy to miss an important indication briefly mentioned in the meeting’s readout:  the Council is “reviewing” current financial-market utility (FMU) designations.  Firm-specific and activity-and-practice designations usually get all the airtime.  So it was again on Friday, when FSOC also decided to back off its plan just last November (see Client Report FSOC29) to designate nonbank mortgage banking.  The Council in fact mostly backs off much of what it promises – no wonder Rohit Chopra calls it a “book-report club.”  Precedent thus suggests the FMU threat is idle, but I’ll bet it’s not.

Why?  The FMUs the Council is reviewing were made in 2012 very shortly after Dodd-Frank was enacted in 2010 and told it to do so.  FMUs are to supplement firm designation because one clear lesson of the 2008 crisis is that market infrastructure matters at least as much as very big banks and a nonbank or two.  FMU designations are thus designed to ensure proper functioning of the “clearing and settlement of payment, securities, and other financial transactions” (see FSM Report PAYMENT11). Designated payment companies are subject to Federal Reserve systemic supervision and securities and derivatives entities fall under either the SEC or CFTC.  Unlike the Council’s extremely-controversial designation at about the same time of four systemically-important financial institutions, the FMU designations then and ever since have drawn little scrutiny and no political dispute.  Indeed, when Donald Trump’s Treasury led a 2019 rewrite of the …

3 05, 2023

FedFin on: Nonbank SIFI Designation

2023-05-03T17:03:24-04:00May 3rd, 2023|The Vault|

In concert with proposing a new systemic-risk methodology, the Financial Stability Oversight Council sought comment on guidance that significantly rewrites the manner in which nonbanks are designated as systemically important financial institutions (SIFIs).  The new approach retracts key aspects of the Trump FSOC’s approach, for example eliminating the necessity of determining if a possible designee is likely to fail and what the costs and benefits of new systemic standards are likely to be.  Although the new approach retains numerous procedural opportunities for the possible designee to know of and protest action, these and other changes…

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

21 11, 2022

FedFin: We’re Starting to See SIFIs

2022-11-22T13:21:33-05:00November 21st, 2022|The Vault|

As came out into the open last week, FSOC will finally turn to rewriting the Trump era rewrite of the Obama Administration’s FSOC protocols regarding systemic financial institutions and activities.  Could the SIFI reaper be coming for Fannie and Freddie?  We doubt it, but then again…

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

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