The Financial Stability Oversight Council (FSOC) on April 3 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 FSOC in November. The new agency unanimously passed the rule.
One change in the final rule from the earlier 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 examination that could lead it to being judged a systemically important financial institution.
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 FSOC 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 outstanding debt
- 15-1 leverage ratio, as measured by total consolidated assets (excluding separate accounts) to total equity
- 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 to U.S. financial stability," the proposal says.
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