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Non-bank firms about to get tagged by regulators

WASHINGTON, June 1 (UPI) — A panel in Washington is on the verge of tagging three non-bank companies as systemically important to the economy, a market financial reform advocate said.

Dennis Kelleher, chief executive officer of the non-profit Better Markets — which lobbies for greater oversight of the financial sector — said the Financial Stability Oversight Council is ready to act on designating the first non-bank firms that would have to comply with U.S. Federal Reserve regulations, the same as banks under its jurisdiction.

“While we and others have been critical that it has taken FSOC too long — almost five years since the financial crisis — they are over-processing everything out of an abundance of caution and an attempt to avoid lawsuits,” Kelleher said. “But they want to move on it before the actual fifth year anniversary, and time is running out.”

“We have substantial staff work going on … and we’re trying to get this matter up for a decision as quickly as possible,” Treasury Department Secretary Jacob Lew said in a hearing on Capitol Hill recently.

USA Today reported Saturday three non-bank companies — American International Group, Prudential Financial and GE Capital — have revealed in filings with the Securities and Exchange Commission they are being considered for what is essentially a too-big-to-fail designation.

The Dodd-Frank finance overhaul bill mandated the formation of the FSOC, which was to be comprised of representatives of all the major financial regulatory agencies. Among its responsibilities was the naming of companies so big or so deeply interwoven with the financial system that their failure would be damaging to the economy as a whole.

Those companies would be placed under central bank jurisdiction and regulated like a bank, which likely means they will have to raise capital to act as a buffer against failure in hard times and undergo regular stress tests, which the Fed uses to gauge the ability of large banks to withstand an economic downturn.

The council is expected to vote Monday on the first group of non-bank companies requiring federal monitoring. The companies will have 30 days to appeal their designations, so the FSOC will not release the company names to the public until after the appeal process runs its course, the newspaper said.

Copyright 2013 United Press International, Inc. (UPI).

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