On April 21, 2023, the Financial Stability Oversight Council (“FSOC” or “Council”) voted unanimously to propose (1) amendments to its existing interpretive guidance governing the designation of nonbank financial companies for supervision by the Federal Reserve Board and application of prudential standards (“Proposed Interpretive Guidance”) and (2) an “analytic framework” for identifying, assessing, and responding to financial stability risks (“Proposed Analytic Framework”). Comments on both proposals are due 60 days after their publication in the Federal Register.
The Proposed Interpretive Guidance would replace the FSOC’s existing designation guidance, which was finalized in 2019 (“2019 Interpretive Guidance”), and includes both procedural and substantive modifications that could facilitate new nonbank SIFI designations. The Proposed Interpretive Guidance reverts, in several significant respects, to the approach embodied in the initial 2012 designation guidance (“2012 Interpretive Guidance”). It also appears to be designed to address the grounds on which the FSOC’s prior designation of MetLife, Inc. was previously struck down in court, including by omitting any requirement to conduct a cost-benefit analysis or an assessment of the likelihood of a company’s material financial distress prior to making a designation.
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