NU Online News Service, July 31, 3:06 p.m.EDT

Two insurance industry trade groups are asking the FinancialStability Oversight Council to allow all nonbank financialcompanies a full hearing as part of the process for determiningwhether a company should be designated systemicallysignificant.

The comments by the American Insurance Association and theFinancial Services Roundtable are in response to a request from theFSOC for comment on the procedures it should use in determiningwhether it should grant an “oral hearing” to a non-bank it isconsidering designating as “SIFI.”

The comment period closed Monday.

According to an industry lawyer, the hearings would be privateoral hearings, not public.

The lawyer explains, “Part of our point is that evenidentification of a company's name that is under SIFI considerationmight bring adverse consequences.”

Richard M. Whiting, executive director & general counsel forthe Financial Services Roundtable, says in the FSR letter that, “webelieve the FSOC should exercise its statutory discretion to grantoral hearings to any nonbank financial company that requestsone.”

Whiting says, “An oral hearing is crucial to ensuring that acompany knows why it is being considered for potential designationand enabling it to effectively respond.”

Stef Zielezienski, general counsel for the American InsuranceAssociation, asks in his comment letter for the FSOC to “revisit”its hearing procedures in order provide nonbank financial companiesthe opportunity to have an oral hearing, if requested.

He also asks that the FSOC provide nonbanks such as insurers theauthority to obtain discovery of relevant material upon which theFSOC is basing its proposed determination. Zielezienski also asksfor ability to present witnesses and examine FSOC staff regardingthe basis for the proposed determination that the company should besupervised by the Federal Reserve Board.

The FSOC will determine whether a non-bank is systemicallysignificant under a provision of DFA which gives it thatauthority.

The criteria the FSOC must use in determining whether aninstitution is SIFI is whether material financial distress at thenonbank financial company could pose a threat to the financialstability of the U.S., and, if so, whether the nature, scope, size,scale, concentration, interconnectedness, or mix of the activitiesof the nonbank financial company could pose a threat to U.S.financial stability.