The Financial Stability Oversight Council (FSOC) may not want to have to keep tabs on a large number of systemically important financial institutions (SIFIs).
Larry Zimpleman, chairman of Principal Financial Group Inc., Des Moines, Iowa (NYSE:PFG), talked about the federal SIFI designation program recently during Principal’s second-quarter earnings call.
The Dodd-Frank Wall Street Reform and Consumer Protection Act created FSOC to help federal financial services regulators monitor events, trends and companies that could threaten the financial stability of the United States.
Officials inside and outside the United States also are talking about creating a class of SIFIs that would get extra attention from regulators because of their large size or the possibility that their failure could hurt other financial institutions.
An analyst participating in the earnings call asked why large, publicly traded U.S. life insurers now seem more confident than they used to be about their ability to escape full-blown SIFI status.
Zimpleman acknowledged that, at the beginning of the year, he thought Principal was more likely to “fall into that bucket.”
The probability that Principal will fall into the SIFI bucket now appears to be lower because FSOC “now seems more likely to want to have a relatively smaller number of institutions in that designation than perhaps I might have thought six months ago, Zimpleman said. “I think that helps us.”
FSOC also seems to be starting to understand the insurance industry better, and that might help, Zimpleman said.
Principal has tried to prepare for SIFI designation anyway by by working to meet the capital ratio and financial flexibility requirements set by the international Basel III standards for bank SIFIs, Zimpleman said.
- Allison Bell