FSOC Approves Final Rule on Nonbank Financial Company Determination

Published by Michael Novogradac on Thursday, April 5, 2012 - 12:00am

On April 3, the Financial Stability Oversight Council (or FSOC) approved rules that it will use to determine which nonbank financial companies are considered systemically important financial institutions, or SIFIs. Duly designated SIFIs will be supervised by the Federal Reserve Board and be subject to additional standards and regulatory reporting requirements.

The FSOC will now begin its designation process, with the intention of making some designations this year. The determination will not be purely formula driven; rather, each determination will evaluate each company separately, including both quantitative and qualitative information.

Quantitative thresholds include:

  • Having $50 billion in assets
  • Having $30 billion in credit default swaps outstanding
  • Having $20 billion in total debt outstanding
  • Having a 15 to 1 leverage ratio

According to Fitch Ratings, the following companies are a subset of companies likely to be designated as SIFIs, given their size and activities:

  • MetLife
  • AIG
  • Berkshire
  • GECC
  • Prudential

So what are the consequences of being designated a SIFI? We’ll have to wait and see to be sure. Tune in to the April 10 Tax Credit Tuesday Podcast to hear more.