Regulators to tweak oversight requirements for non-bank firms

Spencer Bachus

U.S. regulators may individualize requirements that implement stricter oversight on non-bank financial institutions based on the firm’s complexity, activities and size.

Michael Gibson, the director of the Federal Reserve’s banking supervision and regulation, said during a Wednesday House Financial Services Committee hearing that increased capital standards, as well as bank stress tests, may be adjusted individually based on an assessment of the firm.

Last month, a group of regulators finished outlining a three step process to be used to identify non-bank firms that pose a risk and require stricter oversight. The council is expected to make those determinations by the end of the year.

“Dodd-Frank did not end ‘Too Big to Fail,’ as its supporters claim; it enshrined ‘Too Big to Fail’ into law,” Chairman Spencer Bachus (R-Ala.) said. “When government declares a financial institution is ‘systemically important,’ it is saying that institution is ‘Too Big to Fail’ because of the perception the government will step in with a bailout to protect it from collapse.”

Under the 2010 Dodd-Frank Act, financial institutions with $50 billion in assets are considered “systemically important financial institutions” — or SIFIs — and regulators are given the authority to determine which non-bank firms pose risks to the U.S. financial system.

Firms labeled as SIFIs are required to comply with stricter capital, leverage and risk-management standards under the supervision of the Fed. Once a firm is labeled as a SIFI, regulators may continue to monitor the firm and make adjustments to requirements as needed.

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