Action Names Eight Financial
Market Utilities as Systemically Important, Subjects Firms to Heightened Risk
Management Standards
Council Submits Second Annual
Report to Congress
WASHINGTON – The Financial
Stability Oversight Council (the Council) today voted unanimously to designate
eight financial market utilities (FMUs) as systemically important under Title
VIII of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the
Dodd-Frank Act). This action, the first designations
made by the Council, represents another key step towards creating a safer, more
resilient financial system. The
authority to designate FMUs—often referred to as the “plumbing of the financial
system” for their role in clearing and settling transactions between financial
institutions—is an important component of Wall Street Reform and is one of a
number of tools now available to constrain risk and help protect against future
financial crises.
The
designated FMUs are:
•
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 Dodd-Frank Act provides four specific factors the
Council must consider when determining whether an FMU is, or is likely to
become, systemically important. The
Council’s regulations regarding the designation of FMUs, which can be found at www.fsoc.gov,
provide more detail regarding these factors and their role in the Council’s
analysis of whether to designate an FMU.
The four factors are (1) the aggregate monetary value of transactions
processed by the FMU; (2) the aggregate exposure of the FMU to its
counterparties; (3) the relationship, interdependencies, or other interactions
of the FMU with other FMUs or payment, clearing, or settlement activities; and
(4) the effect that the failure of or a disruption to the FMU would have on
critical markets, financial institutions, or the broader financial system.
The vote follows a process laid out in the Council’s
regulations. Each FMU received a letter
on May 22, 2012, informing it that the Council had proposed its designation and
providing it with the rationale for the Council’s determination. The FMUs each had 30 days to request a
hearing if they disagreed with the proposed determination of the Council or the
Council’s proposed findings of fact, but no FMU requested such a hearing. The Council also continues to make progress
on its first designations of nonbank financial companies for supervision by the
Board of Governors of the Federal Reserve System and enhanced prudential
standards.
Also at its meeting today, the Council approved its 2012
Annual Report, which was developed collaboratively by the members of the
Council and their agencies and staff. Under
the Dodd-Frank Act, the Council must report annually to Congress on a range of
issues, including the activities of the Council, significant financial market
and regulatory developments, potential emerging threats to the financial
stability of the United States, and all determinations made under Section 113
or Title VIII of the Dodd-Frank Act. The
report must also make recommendations for promoting market discipline,
maintaining investor confidence, and enhancing the integrity, efficiency, competitiveness,
and stability of U.S. financial markets. In addition, the report describes progress on
the implementation of the Dodd-Frank Act.
In addition, the Council released the minutes from its June
11, 2012, meeting, and approved its report on the study of a contingent capital
requirement for nonbank financial companies supervised by the Board of
Governors of the Federal Reserve System and for large, interconnected bank
holding companies.
All of these documents are available at www.fsoc.gov.
Present at the Council meeting were:
•
Tim Geithner, Treasury Secretary (Chairperson of
the Council);
•
Ben S. Bernanke, Chairman of the Board of
Governors of the Federal Reserve System;
•
Richard Cordray, Director of the Consumer
Financial Protection Bureau;
•
Edward DeMarco, Acting Director of the Federal
Housing Finance Agency;
•
Gary Gensler, Chairman of the Commodity Futures
Trading Commission;
•
Martin Gruenberg, Acting Chairman of the Federal
Deposit Insurance Corporation;
•
Debbie Matz, Chairman of the National Credit
Union Administration;
•
Mary Schapiro, Chairman of the U.S. Securities
and Exchange Commission;
•
Thomas Curry, Comptroller of the Currency;
•
S. Roy Woodall, Jr., Independent Member with
Insurance Expertise;
•
John P. Ducrest, Commissioner, Louisiana Office
of Financial Institutions (non-voting member);
•
John Huff, Director, Missouri Department of
Insurance, Financial Institutions, and Professional Registration (non-voting
member);
•
David Massey, Deputy Securities Administrator,
North Carolina Department of the Secretary of State, Securities Division
(non-voting member); and
•
Michael McRaith, Director of the Federal
Insurance Office (non-voting member)
For more information about each member agency's financial
reform implementation efforts, please follow the links below.
Board of Governors
of the Federal Reserve System
Commodity Futures Trading
Commission
Consumer Financial
Protection Bureau
Federal Deposit Insurance
Corporation
Federal Housing Finance Agency
National Credit Union Administration
Office of the Comptroller
of the Currency
Securities and Exchange
Commission
Treasury Department
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