NU Online News Service, June 17, 2:06 p.m. EDT
Republican members of the House Financial Services Committee grilled federal regulators on how they will represent insurance interests on the international stage and regulate the industry through authority granted in the Dodd-Frank financial-services reform law.
Republicans also made clear that they want the independent member of the Financial Stability Oversight Committee with insurance expertise named as soon as possible.
At the hearing, Financial Regulatory Reform: The International Context, both Rep. Spencer Bachus, R-Ala., chairman of the committee, and Rep. Shelley Moore Capito, R-W.Va., chair of the panel's Subcommittee on Financial Institutions and Consumer Credit, brought up the FSOC issue in questioning Lael Brainard, undersecretary of the Treasury for international affairs.
Under questioning, Brainard also touched on several other international issues involving insurance and financial services, including trade, accounting standards and competitiveness.
When asked by Capito, "When will the voting member insurance expert be appointed?" Brainard said she had no answer on the timeline.
Later, Bachus said specifically to Brainard, "Many of our members are concerned about the insurance voting member."
At the same time, in response to a question from Capito, Brainard said that Michael McRaith, the director of the new Federal Insurance Office within Treasury, is proceeding "right away" to set up the office. McRaith is the former Illinois insurance director.
"Yes," Brainard says. "It's important that the insurance industry have representation" in dealing with insurance issues, such as international capital and liquidity standards, and in fostering the international competitiveness of the U.S. financial services industry.
Brainard added that the "insurance industry will be represented throughout the international process."
She notes that the National Association of Insurance Commissioners (NAIC) has a representative on the International Association of Insurance Supervisors, and that Treasury will have McRaith involved in that process as well, as had been previously disclosed.
Brainard also reassured members of the panel that the FSOC "will take into account the unique nature of insurance" in its deliberations about which firms will be considered systemically significant and therefore subject to additional oversight through the FSOC.
"Absolutely," Brainard said in answering a question from Capito. "We will examine the current level of regulation across all industries when implementing the Dodd-Frank Act."
Republicans also asked about whether insurers will be allowed to invest in private equity, in an exception to the so-called "Volcker provision" of Dodd-Frank.
Brainard said that allowing insurers to invest in private equity "is under consideration" through the FSOC, while Daniel Tarullo, representing the Board of Governors of the Federal Reserve Board, said whether an insurer will be allowed to invest in private equity will be determined by whether or not an insured depository institution owned by an insurer is engaged in such an activity.
Mary Schapiro, chair of the Securities and Exchange Commission, said the Volcker amendment applies only to banking entities that are part of complex financial institutions, so whether an insurer is allowed to engage in private equity "will depend on how the entity is structured."
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