FSOC Criticized by Government Accountability Office, but GAO Report Misses Critical Substantive Improvements; FRB Begins to Identify Prudential Regulation for SIFIs

November 25, 2014

The U.S. Government Accountability Office just issued a report on the Financial Stability Oversight Council's (“FSOC”) systemically important financial institution (“SIFI”) designation process, entitled “Further Actions Could Improve the Nonbank Designation Process” (“Report”). The Report documents numerous process, documentary and transparency deficiencies in which improvements would indeed be welcome.

Our involvement in the designation process suggests that there are further critical substantive areas that should be enhanced, which would in fact be advantageous to both the company being evaluated and the FSOC. From the FSOC’s perspective, good governance will increase public confidence in the process and may lessen the likelihood that a federal court would invalidate a designation. Many of these suggestions have recently been discussed with the FSOC, most notably in a set of meetings that the FSOC called on November 12, 2014, which have been referenced in several press accounts.

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