Investment Company Institute backs FSOC’s proposal on SIFIs

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The Investment Company Institute (ICI) has come out in support for the Financial Stability Oversight Council’s (FSOC) proposal on the treatment of systemic risk among nonbank financial companies.

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FSOC’s proposal features an activities-based approach to addressing risks and measures to help ensure that financial entities are designated as systemically important financial institutions (SIFIs) only as a last resort. ICI said an activities-based approach is a more effective way to address risk, rather than addressing risks only at an individual company that may be designated. It also makes clear that a SIFI designation will be reserved for use in rare circumstances.

“I commend the Council for a well-reasoned and thoughtful proposal—one that rightly seeks to make the most of FSOC’s coordinating power,” ICI President and CEO Paul Schott Stevens wrote in a letter to FSOC leadership. “Under this proposal, FSOC will make better use of the expertise and different perspectives of financial regulators, while operating in a more transparent and accountable manner. The proposal also appropriately reserves FSOC’s SIFI designation authority as a last resort for cases when a specific company clearly poses significant risks to the US financial system that cannot be adequately addressed through other means.”

FSOC’s proposal also adds a new section that requires FSOC to consider the expected benefits and costs of a nonbank SIFI designation. ICI says this will help improve the council’s decision making.

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