Systemic Risk Council Urges US Treasury not to Marginalize Financial Stability Oversight Council’s Power to Designate Non-Bank Financial Intermediaries as Systemically Significant

WASHINGTON--()--The Systemic Risk Council urges the U.S. Treasury and other members of the Financial Stability Oversight Council (FSOC) to abandon their 6 March proposal to marginalize their power to designate individual non-bank financial firms as systemically significant.

The proposed guidance, while framed in terms of setting preconditions for when the FSOC would exercise its designation power, would in practice almost certainly deprive the FSOC of the capacity to designate a non-bank firm as systemically significant in time to head off the risks posed by that firm to financial stability.

Commenting on the Treasury’s proposal, SRC Chair Paul Tucker said:

If FSOC really intends activities to be center stage, it should get on with putting in place a general policy to protect the economy from threats to stability from shadow banking. But nor should FSOC flinch from designating any individual intermediaries whose disorderly failure would be systemic. It is too early to put aside one of the most obvious lessons of 2008/09.”

Read the full letter here.

The SRC already expressed its concern with the FSOC’s proposed approach in a comment letter submitted to the Treasury last year.

Read earlier letter here.

For further information contact David Evanson at devanson@comcast.net or 215.460.8139 or Bristol Voss at bristol.voss@cfainstitute.org or 212.705.1738.

About The Systemic Risk Council

The Systemic Risk Council (SRC or Council) is a private sector, non-partisan body of former government officials and financial and legal experts committed to addressing regulatory and structural issues relating to global systemic risk, with a particular focus on the United States and Europe. It has been formed to provide a strong, independent voice for reforms that are necessary to protect the public from financial instability. The goal is to help ensure a financial system in which we can all have confidence.

The SRC was formed by CFA Institute and The Pew Charitable Trusts in June 2012 to monitor and encourage regulatory reform of U.S. capital markets focused on systemic risk. CFA Institute became the sole supporting organization in August 2015. The statements, documents and recommendations of the Council does not necessarily represent the views of the supporting organization.

Contacts

David Evanson
devanson@comcast.net
215.460.8139

Bristol Voss
bristol.voss@cfainstitute.org
212.705.1738

Release Summary

The Systemic Risk Council urges Treasury to abandon a proposal to marginalize the designation of non-bank intermediaries as systemically significant.

Contacts

David Evanson
devanson@comcast.net
215.460.8139

Bristol Voss
bristol.voss@cfainstitute.org
212.705.1738