One of the Council’s statutory purposes is to identify risks to financial stability that could arise from the material financial distress or failure, or ongoing activities, of nonbank financial companies.
Nonbank Financial Company Designations
Under Section 113 of the Dodd-Frank Act, the Council is authorized to determine that a nonbank financial company’s material financial distress—or the nature, scope, size, scale, concentration, interconnectedness, or mix of its activities—could pose a threat to U.S. financial stability. Such companies will be subject to consolidated supervision by the Federal Reserve and enhanced prudential standards.
Current Interpretive Guidance and Rules
On November 3, 2023, the Council approved updates to its interpretive guidance regarding nonbank financial company designations.
The Council has also issued rules regarding its authority to make nonbank financial company designations.
Previous Interpretive Guidance; Other Materials
On April 21, 2023, the Council approved a notice and request for public comment regarding proposed interpretive guidance for nonbank financial company designations.
On December 4, 2019, the Council approved updates to its interpretive guidance regarding nonbank financial company designations.
On March 6, 2019, the Council approved a final rule and a notice and request for public comment regarding proposed interpretive guidance for nonbank financial company designations.
On June 8, 2015, staff supporting the Council released guidance regarding the methodologies for calculating certain thresholds in the nonbank financial designations company process:
On February 4, 2015, the Council approved supplemental procedures for reviewing nonbank financial companies for potential designation:
On April 11, 2012, the Council approved a rule and interpretive guidance for nonbank financial company designations:
Council Bases for Designations of Nonbank Financial Companies and Rescissions of Designations
The Council made final determinations to designate American International Group, Inc. and General Electric Capital Corporation, Inc. on July 8, 2013; Prudential Financial, Inc. on September 19, 2013; and MetLife, Inc. on December 18, 2014.
- American International Group, Inc.
- General Electric Capital Corporation, Inc.
- Prudential Financial, Inc.
- MetLife, Inc.
The Council announced that it voted to rescind the designations of GE Capital Global Holdings, LLC on June 28, 2016; American International Group, Inc. on September 29, 2017; and Prudential Financial, Inc. on October 16, 2018.
- GE Capital Global Holdings, LLC (Rescission)
- American International Group, Inc. (Rescission)
- Prudential Financial, Inc. (Rescission)
Financial Market Utility Designations
The Dodd-Frank Act also authorizes the Council to designate a Financial Market Utility (FMU) as “systemically important” if the Council determines that the failure of or a disruption to the functioning of the FMU could create or increase the risk of significant liquidity or credit problems spreading among financial institutions or markets and thereby threaten the stability of the U.S. financial system. Designated FMUs will become subject to the heightened prudential and supervisory provisions of Title VIII, which promote robust risk management and safety and soundness, including conducting their operations in compliance with applicable risk-management standards; providing advance notice and review of changes to their rules, procedures, and operations that could materially affect the nature or level of their risks; and being subject to relevant examination and enforcement provisions.
Following the publication of its final rule outlining the criteria, processes, and procedures for the designation of FMUs on July 27, 2011, the Council proposed the designation of an initial set of FMUs on May 22, 2012. At its July 18, 2012, meeting, the Council voted unanimously to designate eight FMUs as systemically important under Title VIII of the Dodd-Frank Act. The designated FMUs are listed below. The bases for the Council’s designations are available here:
- The Clearing House Payments Company L.L.C. on the basis of its role as operator of the Clearing House Interbank Payments System
- CLS Bank International
- Chicago Mercantile Exchange, Inc.
- The Depository Trust Company
- Fixed Income Clearing Corporation
- ICE Clear Credit LLC
- National Securities Clearing Corporation
- The Options Clearing Corporation
The FMUs that the Council designated perform a variety of functions in the market, including the clearance and settlement of cash, securities, and derivatives transactions; many of them are central counterparties and are responsible for clearing a large majority of trades in their respective markets. The Council believes that the completion of the FMU designations process for this initial set of FMUs is a major milestone in the implementation of the Dodd-Frank Act and that the designation of these entities will instill confidence in their respective markets.
Decisions under Section 117 of the Dodd-Frank Act
Section 117 of the Dodd-Frank Act applies to any entity that was a bank holding company with total consolidated assets of at least $50 billion as of January 1, 2010, and that received financial assistance under or participated in the Capital Purchase Plan established under the Troubled Asset Relief Program, and to any successor entity to such a bank holding company. Under section 117, if an entity subject to section 117 ceases to be a bank holding company, it will be treated as a nonbank financial company supervised by the Federal Reserve. However, section 117 provides that an entity may appeal such treatment to the Council.
On September 12, 2018, the Council voted to make a final decision to grant the appeal under section 117 of the Dodd-Frank Act of ZB, N.A., a subsidiary of Zions Bancorporation.