Reply #6: Feds Propose New Non-Bank Regulations

[Demeter]

http://www.thefiscaltimes.com/Articles/2011/02/10/Feds-Propose-New-Non-Bank-Regulations.aspx

U.S. Regulators edged closer on Tuesday to defining which companies, other than banks, require more government scrutiny under the Dodd-Frank financial reform law.

The Financial Stability Oversight Council--a group of regulators that includes Timothy F. Geithner and Fed Chairman Ben S. Bernanke--proposed specific requirements to determine if a company is big enough and interconnected enough to impact the stability of the financial markets. These “systemically important” firms would place them under Fed supervision and subject them to additional capital liquidity requirements.

The Fed’s proposed rule defines two key criteria for regulators to use when determining if a nonbank financial firm should qualify as systemically important: Interconnected bank holding companies with $50 billion or more in assets (Bank of America, JPMorgan Chase & Co., Citigroup, to name a feware automatically qualify) and nonbank firms would also qualify if 85 percent or more of their revenue relates to activities that are financial in nature, as defined in the Bank Holding Company Act.

The proposal will be open to public debate until March 30 and leaves insurers, hedge funds, and private equity firms wondering if they will be subject to stricter regulations that can make them less competitive. Though it’s still unclear which firms will be included, and what rules they’ll have to comply with, this seems to be a club nobody wants to be in....