FSOC may tweak process for spotting super-risky firms

Mon Oct 6, 2014 5:56pm EDT
Email This Article |
Share This Article
  • Facebook
  • LinkedIn
  • Twitter
| Print This Article | Single Page
[-] Text [+]

By Douwe Miedema

WASHINGTON (Reuters) - The U.S. top financial risk council may tweak the way in which it identifies insurers and other companies that are not banks as systemically important, a process the industry and politicians have fiercely criticized.

The Financial Stability Oversight Council, a group of the nation's main financial regulators, has named three such companies as being so important that their demise could pose risks to the global system, subjecting them to tougher oversight.

"The council has received a number of suggestions regarding its process for evaluating non-bank financial companies for potential designation," Treasury Secretary Jack Lew said at a meeting of the FSOC, which he chairs. "The council will begin to examine possible changes in the coming months."

Lew said that the council had received suggestions on how to improve its process around the designations and that he had asked staff to continue to talk to the industry and then report back to him to see if changes were needed.

Insurer MetLife Inc (MET.N: Quote) on Friday said it would fight a plan by the FSOC to designate it as a so-called Systemically Important Financial Institution (SIFI), which would make it the fourth non-bank firm overseen by the Federal Reserve.

The 2010 Dodd-Frank Wall Street reform act defined banks with more than $50 billion in assets as "systemic" but left it to FSOC to determine whether some non-banks also deserved the tag.

The FSOC has so far designated insurers American International Group Inc (AIG.N: Quote) and Prudential Financial Inc PRU.N as SIFIs, along with GE Capital, the financial services arm of General Electric Co (GE.N: Quote).

The designations are part of an effort to rein in the largest and most risky companies after the collapse of investment bank Lehman Brothers during the credit crisis showed how trouble at just one company could roil global markets.   Continued...

U.S. Federal Reserve Chair Janet Yellen (L) and Treasury Secretary Jack Lew (R) arrive to participate in a meeting of the Financial Stability Oversight Council at the Treasury Department in Washington October 6, 2014. REUTERS/Jonathan Ernst