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  1. #1

    Shortcomings seen in U.S. nonbank systemic-risk process for insurers

    Critics of the the Financial Stability Oversight Council’s designation of nonbanks as systemically important got a chance last month to point to what they viewed as shortcomings in its approach, while also offering clues for possible improvements, during a U.S. Senate hearing on the issue.

  2. #2

    Shortcomings seen in U.S. nonbank systemic-risk process for insurers

    Ever since its creation under the 2010 Dodd-Frank Act, the process by which the council designates systemically important financial institutions, or SIFIs, has been criticized as being heavily politicized, and marred with opacity.

  3. #3

    Shortcomings seen in U.S. nonbank systemic-risk process for insurers

    The FSOC was created by the Congress in the wake of the financial crisis as an early warning mechanism, with the intention to detect and designate systemically important institutions and risk areas. This was clearly an effort to preemptively contain possible spillover effects into other areas of the financial sector.

  4. #4

    Shortcomings seen in U.S. nonbank systemic-risk process for insurers

    The council implements a three-stage process of screening and evaluation, where companies potentially subject to designation are measured against specific thresholds based on 10 criteria in Dodd-Frank. If a company has more than $50 billion in total consolidated assets, and breaches any one of the following thresholds, it is identified for more analysis under a second stage.

  5. #5

    Shortcomings seen in U.S. nonbank systemic-risk process for insurers

    In stage two, company data is analyzed in greater depth –with the help of the Office of Financial Research– within the framework of its interconnectedness, size, leverage, substitutability, liquidity risk and maturity mismatch, and existing regulatory scrutiny.

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