FSOC to Change SIFI Designation Process (with Lofchie Comment)

At a recent open session meeting, members of the Financial Stability Oversight Council ("FSOC") announced that they would change the selection process for identifying systemically important financial institutions ("SIFIs").

At the meeting, the Department of Justice delivered a presentation to FSOC regarding the lawsuit brought by MetLife, Inc. The presentation challenged FSOC's determination that the company would be subject to supervision by the Board of Governors of the Federal Reserve System and to enhanced prudential standards. FSOC members promised to provide earlier notification than in the past to firms under scrutiny, make more information about their decisions publicly available and conduct more in-depth reviews of their decisions each year.

FSOC has yet to release a written copy of the changes on which they will vote at a future meeting.

Lofchie Comment: If it is truly in the public interest for the Federal Reserve Board to oversee large insurance companies or clearing corporations, then Congress should adopt legislation containing objective measures to determine what firms would be regulated, and should likewise provide at least some guidance on the types of regulation to which firms in each industry would be subject. The notion of adopting a system of substantive regulation that applies to all insurance companies, clearing corporations and perhaps investment advisers is inherently flawed. There are simply no improvements to be made to FSOC's process that would rescue the underlying substance of the SIFI designation (though greater transparency and more objectivity would still be helpful).

See: FSOC Meeting Press Release for January 21, 2015.See also: Article in the Wall Street Journal. Related news: MetLife to Ask Federal Court to Review SIFI Designation (with Lofchie Comment and YouTube Selection) (January 14, 2015); FSOC Votes to Designate MetLife as a Non-Bank Systemically Important Financial Institution (December 18, 2014); FSOC Proposes Preliminary Designation of MetLife as a Non-Bank Systematically Important Financial Institution (with Lofchie Comment) (September 4, 2014).