Designating Systemically Important Financial Institutions (SIFIs) (CRS Report for Congress)
| Release Date |
Revised March 20, 2015 |
| Report Number |
IN10141 |
| Report Type |
Insight |
| Authors |
Labonte, Marc |
| Source Agency |
Congressional Research Service |
| Older Revisions |
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Summary:
The 2008 financial crisis resulted in government assistance to rescue several financial firms that were considered 'too big to fail' (TBTF) because their failure would cause unacceptable disruptions to the overall financial system. Some of these were non-bank financial firms, including Bear Stearns, Fannie Mae, Freddie Mac, and AIG. A number of approaches have been suggested to solve the 'too big to fail' problem, some of which were enacted in the Dodd-Frank Act (P.L. 111- 203). Central to the Dodd-Frank approach was the creation of a heightened prudential regulatory regime for 'systemically important' financial firms to be administered by the Federal Reserve (the Fed). Under this regime, the Fed is required to set heightened standards for capital, liquidity, risk management, resolution plans, stress tests, early remediation, and concentration limits. The Fed may tailor these standards to account for differences between different types of firms. All bank holding companies with $50 billion or more in assets are automatically subject to the heightened prudential regime. In addition, the Financial Stability Oversight Council (FSOC), a council of regulators, was authorized to designate non-bank financial firms as systemically important by a qualified two-thirds vote. FSOC is headed by the Treasury Secretary, and a designation requires his approval. To date, FSOC has designated four non-banks as systemically important financial institutions (SIFIs)--the insurers AIG, MetLife, and Prudential and the non-bank lender GE Capital. MetLife announced that it is challenging its designation in court. FSOC is considering whether to designate firms in other sectors of the financial system, and recently held a conference on the potential systemic importance of asset managers.
