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FSOC prepares to make non-bank SIFI designations

Timothy Geithner

The Financial Stability Oversight Council is preparing to name five non-bank “systemically important financial institutions” that will be subject to increased oversight and supervision by U.S. regulatory authorities.

The FSOC plans to request confidential information from the unnamed firms during a meeting on Sept. 28, after which the firms will have 30 days to comply with the regulator’s data request, FierceFinance reports.

Non-banks maintain that a SIFI designation would burden the firms with unnecessary costs, saying that their failure would not pose a threat to economic stability, according to Businessweek.

America’s largest banks, including Bank of America, Citigroup, Goldman Sachs, JPMorgan Chase, Morgan Stanley and Wells Fargo, have already been labeled as SIFIs. Prudential, Met Life, GE Capital and AIG all meet the criteria to be designated as a SIFI.

The $182.3 billion bailout of AIG, which conducted largely unregulated over-the-counter derivatives trades that contributed to the recent financial crisis, led to the creation of the FSOC. Timothy Geithner, the U.S. treasury secretary and chairman of the FSOC, said that the committee was “looking very, very carefully” at AIG, as well as several other unnamed firms, Businessweek reports.

Any firm labeled as a SIFI has 30 days to challenge the designation, after which the council will then have 30 days to hold a non-public hearing and 60 days after the hearing to make a final determination. Two-thirds of the council’s members must approve the designation to make it final.

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