The Financial Stability OversightCouncil (FSOC) expects to vote on proposed designations ofan initial set of nonbank financial companies in the near term,according to Treasury Secretary Jacob Lew in prepared testimonytoday before the Senate Banking Committee. 

These companies, which include AIG, Prudential Insurance amonginsurers, if designated, would be subject to supervision by theFederal Reserve and enhanced prudential standards. 

In questioning, Senate Banking Committee Chairman Tim Johnson,D-S.D., pointedly asked twice when the nonbank designations wouldbe made.

Lew did not give a timetable for nonbank SIFIsbut did say that it is a priority to getting the DoddFrank work done expeditiously, and appeared to suggest severaltimes he was making sure Dodd-Frank work started moving ahead at afaster pace.

"My role is to make sure we don't measure our progress in monthsand years but we measure in weeks and months," Lew said.

He said he has made it clear that there is an enormous prioritythat "we complete the rules so everyone knows what the policy is,"and so that he public can be protected.

We must implement Dodd-Frank, and we must do it quickly, but weneed to continue to look at the whole system, Lew said intestimony. Lew also made statements that appear to show flexibilityon crafting rules that are more tailored to the institutions over a"one size fits all" regime.

"I think there will be progress this year," Lew said. He notedthere is an FSOC meeting the first week in June and while he hashad three FSOC meetings so far in his three months as Treasurysecretary, he has met on the issue in between these formalmeetings.

Lew, who heads FSOC, said he was trying to get the nonbank SIFImatter up for a decision "as quickly as possible."

"I have actually stepped on the accelerator," with regard toDodd-Frank implementation, Lew said later on in the hearing. Hesaid this is important because finalizing Dodd-Frank work is amatter of "public trust."

Lew added, though, that he does not have the ability to directaction with regard to other regulators on FSOC but said it was morea matter of moral situational influence he can have.

If an insurance SIFI designation or designations are made, itmight not be public immediately, as the companies have a hearing orconsultation period with FSOC. The companies can announce at anytime the qualified FSOC determinations, but Treasury has indicatedit will not announce it until the process is complete, whichincludes feedback from any companies.

There has been "substantial progress but more progress to bemade," Lew said in open remarks on too-big-to-fail and on FSOC'sprogress.

Sen. Jack Reed, D-R.I., asked about Section 171 of theDodd-Frank Act — the Collins amendment — which would place bydefault Federal Reserve Board-supervised insurers under Basel 3minimum capital standard requirements, which concerns the industry,some government officials and various Congressmen.

Lew responded that first, FSOC needs to make a determinationwhether the companies' failures would be a threat to the financialstability of the country. 

However, he acknowledged in questioning earlier that differentagencies are figuring out how to set levels in various areas,"possibly referring to managing the prudential standards and Basel 3capital standards. Lew also later noted he had heard the concernsabout the rules being fitting to all companies. Lew said it was anissue the Fed "will look at and we will look at if thedetermination is made."

His statement reflects only nonbank SIFIs (reliant on SIFIdeterminations being made) and not the two dozen or so insurerswith savings and loans holding companies, such as State Farm andThe Principal (the latter of which is in the process ofdethrifting).

Lew also appeared to show flexibility on Basel 3, which hecalled "a floor and not a ceiling," and discussed aspiration goalsglobally that pull up standards everywhere. The possibleflexibility he showed on the Basel 3 blanket application to allinstitutions under the Fed's umbrella were directed to senators'concerns on community banks being subject to Basel 3 capitalrules.

In general, Lew noted that for institutions, the capital levelneeds to form a thick enough layer to make sure we never get to thepoint of too-big-to-fail. Lew spoke in reference to crafting finalrules on adequate capital standards in general.

There needs to be sufficient capital for the point ofliquidation [if a company fails], and just how it gets there andhow it works is something FSOC is still working on, Lew said, inresponse to a question on capital held at the holding companylevel.

Insurers do not keep their capital at the holding company level,but address risk-based capital at the subsidiary level. However,Lew did not get into any detail about insurance companies oroperations during this panel session.