Filed Under:Markets, Regulation/Legislation

FSOC Votes on Guidelines for Designating Insurers as Systemically Significant

The Financial Stability Oversight Council today approved the final regulation governing the factors it will use to determine whether an insurer is “systemically significant.”

The final rule is consistent with the regulation proposed by the new agency in November. The FSOC unanimously passed the rule.

One change in the final rule from the proposal is that it clarifies the applicability of the confidentiality provisions to information collected by the FSOC as part of the determination process.

The final rule also provides additional information on both the method and frequency of calculating Stage 1 thresholds—the initial criteria used to determine whether an institution should be subject to additional criteria that would lead it to be judged a SIFI.

The FSOC says it intends to apply uniform quantitative thresholds to a broad group of nonbank financial companies in Stage 1 to help identify companies for further evaluation.

The FSOS explains that a nonbank financial company will be subject to further evaluation if it has at least $50 billion of total consolidated assets and meets or exceeds any one of the following thresholds:

  • $30 billion in gross notional credit default swaps outstanding for which the nonbank financial company is the reference entity.
  • $3.5 billion in derivative liabilities.
  • $20 billion of total debt outstanding.
  • 15 to 1 leverage ratio, as measured by total consolidated assets (excluding separate accounts) to total equity; or
  • 10 percent ratio of short-term debt (having a remaining maturity of less than 12 months) to total consolidated assets.

In addition, the FSOC “may consider any nonbank financial company for a determination if the FSOC believes the company could pose a threat toU.S.financial stability,” the proposal says.

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