On November 3, 2023, the ten voting members of the Financial Stability Oversight Council (“FSOC” or “Council”) voted unanimously to finalize amendments to its existing interpretive guidance (“2019 Interpretive Guidance”) governing the designation of nonbank financial companies for supervision by the Federal Reserve Board and application of prudential standards (“Interpretive Guidance”) and an “analytic framework” for identifying, assessing, and responding to financial stability risks (“Analytic Framework”). The Council finalized the Interpretive Guidance and Analytic Framework substantively as proposed in April 2023 (described in our publication dated April 26, 2023), with minor modifications in response to public comments. The Interpretive Guidance and Analytic Framework replace the 2019 Interpretive Guidance and include both procedural and substantive modifications that could facilitate new nonbank financial company designations (“SIFI designations”).
The Interpretive Guidance reverts, in several significant respects, to the approach embodied in the FSOC’s initial 2012 designation guidance (“2012 Interpretive Guidance”), including by removing the prioritization of an activities-based approach to address risks to financial stability. The Council also was not persuaded by comments that it was required by the court decision in MetLife to conduct a cost-benefit analysis or an assessment of the likelihood of a company’s material financial distress prior to making a designation. The Interpretive Guidance will become effective 60 days following its publication in the Federal Register and the Analytic Framework will become effective upon its publication.