FSOC Makes Changes to SIFI-Designation Process; Potential Companies Will Be Informed Earlier
February 5, 2015 by Jeff Jeffrey, Washington Bureau manager: jeff.jeffrey@ambest.com
WASHINGTON – The Financial Stability Oversight Council has agreed to inform companies earlier when they come under review as systemically important financial institutions and provide additional opportunities for companies and their regulators to engage with the council and staff.
FSOC members voted to approve that change and others during a non-public conference call hosted by Treasury Secretary Jacob “Jack” Lew.
The FSOC also agreed to provide more information to the public about its designations work. However, the council said it would continue to protect sensitive, nonpublic information.
It will also create a clearer and more robust process for its annual reviews of SIFI designations. “This process will enable more engagement between designated companies and the council and staff, with ample opportunity for companies to present information and to understand the council’s analysis,” Treasury said.
“The council has the unique and critical mission of identifying and responding to risks to U.S. financial stability,” Lew said. “It is a young organization that, as it grows and matures, must continue to be flexible and adjust its processes as needed to fulfill its mandate.”
Treasury said in a statement the changes to its process for designating SIFIs fall into three categories: Engagement with companies under consideration by the FSOC; transparency to the broader public regarding the designations process; and engagement during the FSOC’s annual reevaluations of designations.
Many of the changes adopted by the FSOC resemble recommendations made by insurance regulators and industry representatives during a series of Nov. 12 meetings with industry stakeholders.
During the meetings, members of the FSOC’s Deputies Committee met with representatives of 13 trade organizations and heard presentations on potential problems with the SIFI-designation process. The insurance industry was represented by the American Council of Life Insurers, the American Insurance Association and the Property Casualty Insurance Association of America (Best’s News Service, Jan. 21, 2015).
FSOC moved to adopt the changes to its SIFI-designation process amid an ongoing legal challenge to the SIFI designation issued to MetLife Inc.
MetLife has sued the FSOC in federal court, seeking to have its SIFI designation withdrawn. MetLife’s complaint takes aim at what the company says is a “flawed” process for issuing SIFI designations to insurance companies.
MetLife is one of only three insurance companies to receive a SIFI designation, which requires it to meet additional reporting requirements and higher capital standards. Prudential Financial Inc. and American International Group Inc. are the other two insurance-company SIFIs.
