Republican members of the House Financial Services Committee told Securities and Exchange Commission Chairwoman Mary Jo White, Fed Chairwoman Janet Yellen and Treasury Secretary Jacob Lew on Friday to provide them with documents and answers by May 16 on how the Financial Stability Oversight Council and the Financial Stability Board determines which nonbanks will be determined to be global systemically important financial institutions (G-SIFIs).
In a letter to the three members of FSOC, the GOP committee members — which included its chairman, Rep. Jeb Hensarling, R-Texas, as well as the chairman of the committee’s capital markets subcommittee, Rep. Scott Garrett, R-N.J. — said that because the FSB is in the process of “examining certain U.S. companies for possible designation as G-SIFIs,” the lawmakers want to “fully understand the process the FSB uses to designate G-SIFIs, and that we understand the current state of these deliberations,” as they have “concerns that decisions are being made that could have significant impact on the U.S. economy.”
The GOP lawmakers also stated that they have three “broader concerns” about the FSB and FSOC: the lack of transparency and due process in the designation of firms as systemically important; the types of firms that are being considered for designation and why; and the consequences of designation on individual companies, industries and the economy as a whole.
Said the lawmakers: “Both FSB and FSOC appear to take a ‘we-know-it-when-we-see-it’ approach to identifying firms that pose a risk to financial stability. In particular, there do not appear to be clear rules or criteria to determine when a nonbank financial institution qualifies as a ‘systemic risk” to the U.S. or global financial system.”