WASHINGTON Dec 2 The U.S. Chamber of Commerce
on Monday called for changes to the U.S. financial risk council
that could slow the process by which it designates large
financial firms as "systemic," subjecting them to tougher
In a five-page list of proposed reforms, the Chamber
criticized the Financial Stability Oversight Council's
governance structure, saying it lacks transparency and does not
give enough deference to the FSOC-member regulators who have the
The Chamber plans to host a panel discussion on the subject
on Wednesday, where several experts who have been critical in
the past of the FSOC's operations will speak about systemic risk
"Structural shortcomings have been exposed," the Chamber
wrote in its list of proposed reforms. "We believe important
changes must be made."
The FSOC is a council of regulators created by the 2010
Dodd-Frank Wall Street reform law that is chaired by the
Treasury Secretary and composed of the heads of other banking
and market regulators, including the Federal Reserve and the
Securities and Exchange Commission.
The FSOC has the power to designate firms whose collapse
could pose widespread market disruption as "systemically
important financial institutions," or SIFIs. Any firm designated
faces tougher capital rules and oversight by the Federal
Each member of the council casts a vote in deciding which
firms should face designation.
Earlier this year, the FSOC voted to designate General
Electric Co's GE Capital, American International Group
and Prudential Financial Inc.
The FSOC has also started looking into whether large asset
managers like Blackrock could be next in line.
For the vote on Prudential, the FSOC's independent insurance
member Roy Woodall and Federal Housing Financial Agency Acting
Director Edward DeMarco both dissented.
The Chamber did not explicitly discuss the FSOC's
decision-making on the designation of Prudential.
However, it was critical of the FSOC's current voting
threshold, and called for changes that would empower those who
vote against designation.
"If the primary regulator or independent council member does
not vote in favor of designating a non-bank financial company
for which the council member has industry expertise... then a
second vote shall be scheduled within 45 days," the Chamber
wrote. "The primary regulator shall issue a report to the FSOC
within 30 days of the initial vote explaining its rationale as
to why a firm should not be designated."
In addition to changing the voting threshold, the Chamber
suggested a slew of other reforms.
One proposal would allow the primary regulator of a
designated non-bank SIFI to oversee the firm, rather than the
A third proposal calls for expanding representation on the
Currently, the FSOC is only composed of the heads of each
regulatory agency, even though many of the agencies like the SEC
have multi-member commissions.
The views of these other regulators are not represented at
the FSOC - a fact that led to some controversy last year after
the FSOC and the SEC butted heads over whether to propose a new
round of reforms for money market funds.