May 22, 2012 / 11:30 PM / 7 years ago

UPDATE 2-U.S. risk council identifies initial set of clearinghouses

* FSOC did not release name of designated clearinghouses

* Designating firms will have chance to contest decision

* CME says it has been designated and will not contest decision

By Dave Clarke and Rachelle Younglai

WASHINGTON, May 22 (Reuters) - A council of U.S. regulators on Tuesday approved an initial list of clearinghouses to be designated as “systemically important,” a label that would subject them to new rules and tougher oversight.

The group of regulators, the Financial Stability Oversight Council, did not disclose names of the clearinghouses. Under Dodd-Frank, the financial reform law that created the council, companies are allowed to contest the designation.

The council, whose action was announced by the Treasury Department, expects to make a final decision on the initial set of clearinghouse designations as early as this summer.

Those chosen as “systemically important” would gain access to the Fed Reserve’s emergency lending facilities but would also be required to comply with tough new rules on capital, liquidity and how much exposure they can have to other firms.

The idea behind having some clearinghouses subject to greater regulatory scrutiny is that they must be more closely policed because their failure could roil financial markets.

With much of the private derivatives market to be forced through clearinghouses by Dodd-Frank, some of the biggest, including those run by CME Group Inc and IntercontinentalExchange Inc, have been expected to get the designation.

A CME spokeswoman on Tuesday said the firm has been designated and does not plan to contest the decision.

“It is not a surprise, and CME has been working to implement the additional requirements that we anticipate will be coming as a result,” CME spokeswoman Anita Liskey said in an email.

On Tuesday an ICE spokeswoman declined to comment but firm executives have previously said they expect a designation.

“We anticipate that ICE Clear Credit will be designated as a systemically important financial institution in the United States and we believe we’re very well prepared for that based on our leadership in swaps clearing,” ICE Chief Executive Jeffrey Sprecher said during a call with analysts earlier this month.

In addition to clearinghouses, the council can designate non-bank financial companies as firms to be supervised by the Federal Reserve through a separate but similar set of powers.

This decision, in particular, is being closely watched by the insurance and hedge fund industries, both of which have tried to convince regulators they do not need additional scrutiny.

Treasury Secretary Timothy Geithner has said some designations should be announced by the end of the year.

Banks with more than $50 billion in assets automatically are subject to additional oversight by the Fed.

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