The Financial Stability Oversight Council recently designated eight payment and clearing firms as “systemically important financial institutions,” — or SIFIs — a label that indicates that the firms’ failures could pose a potential threat to the U.S. economy.
The FSOC, created by the 2010 Dodd-Frank Act, designated the firms as SIFIs following a review that began earlier in the year. The designations mark the first time that an institution other than a bank has been subject to increased risk-management and oversight following the recent financial crisis, NASDAQ reports.
The firms, including Clearing House Payments Co., CLS Bank International, The Depository Trust Co., The Options Clearing Corp., National Securities Clearing Corp., Chicago Mercantile Exchange, Fixed Income Clearing Corp. and ICE Clear Credit, will now be subject to stringent regulations designed by the Federal Reserve, Commodity Futures Trading Commission and Securities and Exchange Commission.
“We expected to be designated,” Chicago Mercantile Exchange spokeswoman Laurie Bischel said, according to NASDAQ. “We will be compliant with additional requirements when they go into effect.”
The SIFI designations are a key element in Dodd-Frank’s effort to curb risky financial activities and end taxpayer-funded bailouts of “too big to fail” firms. Treasury Secretary Timothy Geithner said that, as a result of the recent designations, “these critical market infrastructure entities will be subject to heightened risk-management standards,” NASDAQ reports.