Friday, June 27, 2014

House Panel Shines Light on Financial Stability Board in SIFI Designations

The Congressional spotlight has shone strongly on the Financial Stability Board over the designation of  non-bank financial firms, particularly asset management firms, as systemically important financial firms (SIFIs) by the Dodd-Frank created Financial Stability Oversight Council (FSOC). A letter from House Financial Services Committee Chair Jeb Hensarling (R-TX), and co-signed by his five Subcommittee Chairs asked Treasury Secretary Jacob Lew and SEC Chair Mary Jo White to explain the role of the FSB in FSOC SIFI designations, especially of non-bank firms has apparently gone unanswered. At his recent appearance before the Committee, Secretary Lew said that the FSB and the FSOC operate on parallel tracks and that a SIFI designation by the Board will not necessarily be followed by an FSOC SIFI designation of the same entity. By statute, the Treasury Secretary is the permanent Chair of FSOC.

The FSB is an international body based in Basel, Switzerland that is developing methodologies for designating non-bank firms as global SIFIs (G-SIFIs), essentially under an imprimatur from the G20, which has given the FSB cred in the wake of he financial crisis. The FSB, formerly the Financial Stability Forum, has no writ under US law or treaty and is chaired by Mark Carney, who is also Governor of the Bank of England.

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