A Whole New Ball Game: “Systematically Important Financial Institution” Designations in the Dodd-Frank Paradigm

by Daniel F.C. Crowley, Bruce J Heiman, Rebecca H. Laird, Karishma Shah Page, Andres Gil and Collins R. Clark

On April 3, 2012, the Financial Stability Oversight Council unanimously approved the release establishing final rules and guidelines for how it will designate nonbank systemically important financial institutions ("SIFIs"). Firms so designated will be subject to bank-like prudential supervision, including capital and liquidity requirements.

Excerpt:

The process for designating SIFIs under the Dodd-Frank Wall Street Reform and Consumer Protection Act ("Dodd-Frank") is moving forward apace. On April 3, 2012, the Financial Stability Oversight Council ("FSOC") unanimously approved the release establishing final rules and guidelines (the "Final Release") for how it will designate nonbank SIFIs. Firms so designated will be subject to bank-like prudential supervision, including capital and liquidity requirements.

Notably, we expect the FSOC to begin issuing notices of consideration to potential SIFI designees this summer, with final designations occurring later this year. Consequently, the first stages of the SIFI designation process are likely well underway.

Dodd-Frank left many of the most significant financial services policy determinations up to regulators. As a result, the rulemaking process has shifted to an ongoing dialogue with market participants and continuing Congressional oversight. The SIFI designation process is one of the clearest examples of the new dynamic. In this new environment, potential SIFIs need to assess the implications of being designated as a SIFI and should develop a strategic response that would likely involve engaging with regulators and other policymakers. This EIA identifies critical questions for potential SIFIs; summarizes the legal framework of the SIFI designation process; and discusses key aspects of the Final Release.

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Daniel F.C. Crowley is a partner at K&L Gates LLP. His practice is focused on public policy issues relating to financial services and capital markets. He also provides research on public policy matters to institutional investors.

Bruce J Heiman is a Practice Area Leader in the Policy/Regulatory Practice at K&L Gates LLP. He engages in a wide ranging federal counseling and lobbying practice. He has represented leading companies and trade associations in technology, trade, postal, financial services, transportation and manufacturing industries.

Rebecca H. Laird is of counsel at K&L Gates LLP. Ms. Laird practices in the area of financial institutions law. Her clients are commercial banks, trust companies, savings banks, savings associations and their holding companies.

Karishma Shah Page, Andres Gil and Collins R. Clark are associates at K&L Gates LLP.