Sub-committee chairs from the House Financial Services Committee sent a letter to several members of the FSOC questioning the designation by the Financial Stability Board (FSB) of U.S. firms as global SIFIs (G-SIFIs). While the letter supports cooperation between U.S. and foreign regulators, the letter’s signatories were concerned “about decisions being made that could have a significant impact on the U.S. economy and its citizens through a nontransparent process, by an international body that is not accountable to the American people.” In order to carry out its oversight function, the letter requests that the FSOC provide the Financial Services Committee “with all memoranda or communiques” from the relevant regulatory bodies “concerning the designation or methodologies used to designate global systemically important financial institutions and determine additional capital or other prudential regulatory measures that might apply to such entities” by May 16.
In addition, the letter expresses more general concerns about the designation process both in the U.S. and abroad. The letter takes issue with the lack of rules or criteria governing the designation process – including the lack of a universal definition of systemic risk; the inability of firms being considered for designation to meet with the FSOC or FSB; and the lack of a process by which the designation can be revoked. The letter includes specific recommendations for the FSOC and FSB to take prior to designating any other firms as SIFIs or G-SIFIs. The recommendations include allowing all members of multi-member regulatory bodies, such as the SEC, to participate in FSOC deliberations.