The Financial Stability Oversight Council (FSOC) should look at a nonbank financial companies’ commitments to counterparties when deciding whether the company might need extra scrutiny, according to the American Council of Life Insurers (ACLI).
Julie Spiezio, a senior vice president at the ACLI, Washington, has given that advice in a comment letter submitted to the U.S. Treasury Department in response to department efforts to implement some nonbank financial company supervision requirements included in the Dodd-Frank Wall Street Reform and Consumer Protection Act.
The Dodd-Frank created the FSOC and gave it the authority to decide, under Section 113 of the Dodd-Frank Act, whether some nonbank financial companies are so large and systemically important that they ought to be given extra attention by the Federal Reserve Board.
The Treasury Department has asked for comments on oversight of nonbank financial companies, and it also put out a separate notice seeking public comments on implementing the “Volcker Rule” provision of the Dodd-Frank Act. That provision is supposed to limit the ability of a company with any explicit or implicit federal backing to trade for its own account.
Spiezio emphasizes in the ACLI comment that an insurer that is acting as a traditional insurer typically engages in cautious, carefully supervised investment activities that are unlikely to pose a threat to the stability of the financial system.
The “FSOC should conclude that life insurance companies engaged primarily in traditional insurance activities are not systemically significant and should not be designated under section 113″ for extra attention, Spiezio says.
Elsewhere, Spiezio discusses the ACLI’s views on how FSOC officials might identify potentially systemically significant nonbank financial companies.