Federal District Court Rules against Designation of MetLife as a “SIFI” under Dodd-Frank Act

On March 30, the D.C. federal District Court ruled against the designation by the Financial Stability Oversight Counsel (“FSOC”) of MetLife as a “systemically important financial institution” under the Dodd-Frank Act.  The FSOC has designated just four non-banks as SIFIs, but MetLife was the only one to file a lawsuit protesting it.

The overall impact of the ruling remains unclear, however, because it is under based on longstanding concerns about the protection of the firm’s proprietary business information and it widely anticipated that the FSOC will appeal the ruling.

FSOC Annual Report

On April 30, the FSOC released its 2013 annual report required pursuant to the Dodd-Frank Act.  The report focuses on seven key themes:  (i) vulnerability to runs in wholesale funding markets that can lead to destabilizing fire sales; (ii) the reliance of the housing finance system on government and agency guarantees; (iii) operational risks; (iv) reliance on reference interest rates, including LIBOR; (v) resilience to interest rate risk; (vi) long-term fiscal imbalances; and (vii) U.S. sensitivity to possible adverse developments in foreign countries.  FSOC Report.

Fed Proposed Rule on Systemically Important Financial Market Utilities

On February 26, the Fed issued a proposed rule that would amend Regulation HH to set out the conditions and requirements for a Federal Reserve Bank to open and maintain accounts for and provide financial services to financial market utilities designated as systemically important by the FSOC.  Comments must be submitted within 60 days of publication in the Federal Register.  Fed Release.  Proposed Rule.

Fed Rule on Risk-Management Standards for FMUs

On July 30, the Fed approved a final rule, Regulation HH, implementing provisions of sections 805(a) and 806(e) of the Dodd-Frank Act. The final rule establishes risk-management standards related to the payment, clearing, and settlement activities of certain financial market utilities (FMUs) designated as systemically important by the FSOC, and standards for determining when a designated FMU must provide advance notice of proposed changes to its rules, procedures, or operations. The rule will be effective on September 14. Fed Release. Final Rule.

FSOC Rule on Oversight of Nonbank Financial Companies

On April 3, the FSOC approved a final rule and interpretive guidance on its authority to require supervision and regulation of certain nonbank financial companies.  Section 113 of the Dodd-Frank Act authorizes the FSOC to require a company to be subject to Fed supervision if the FSOC determines that material financial distress at the company, or the characteristics of the company, could pose a threat to U.S. financial stability.  Treasury Release.  Final Rule.

FSOC Proposed Rule on Systemic Importance of Nonbank Financial Companies

On October 11, pursuant to Section 113 of the Dodd-Frank Act and in response to comments to a proposed rule issued on January 18, the Financial Stability Oversight Council issued a second notice of proposed rulemaking and proposed interpretive guidance to provide additional details regarding the framework the FSOC intends to use in the process of assessing whether a nonbank financial company could pose a threat to U.S. financial stability. Comments must be submitted within 60 days of publication in the Federal Register. FSOC Proposed Rule.

Geithner Testimony on FSOC Report

On October 6, on behalf of the Financial Stability Oversight Council, Treasury Secretary Geithner testified before the Senate Banking Committee and the House Financial Services Committee, outlining the conclusions and recommendations made by FSOC in its first annual report, which was released in July. Geithner Testimony.

Rules for Resolution Plans for Financial Institutions

On September 13, the FDIC approved a final rule to be issued jointly with the Fed to implement Section 165(d) of the Dodd-Frank Act. The rule requires bank holding companies with assets of $50 billion or more and companies designated as systemically important by the FSOC to periodically report plans for rapid and orderly resolution upon material financial distress or failure. Submission deadlines are staggered based on asset size, with the first submissions due on July 1, 2012. FDIC Release.

The FDIC also approved an interim final rule, which becomes effective on January 1, 2012, to require insured depository institutions with $50 billion or more in assets to submit periodic contingency plans to the FDIC for resolution upon the institution’s failure. Comments must be submitted within 60 days after publication in the Federal Register. Interim Final Rule.

FSOC Annual Report

On July 26, as required by the Dodd-Frank Act, FSOC released its 2011 Annual Report on U.S. financial markets. The 2011 Annual Report includes recommendations for additional steps to be taken in order to enhance the stability of the U.S. financial markets, including: (i) heightened risk management and supervisory attention; (ii) reforms to address structural vulnerabilities; and (iii) reforms to strengthen the housing finance system. Treasury Release. FSOC Annual Report.

FSOC Final Rule on Designation of FMUs as Systemically Important

On July 18, pursuant to Section 804 of the Dodd-Frank Act, the FSOC adopted a final rule establishing criteria for the designation of a financial market utility (FMU) as systemically important. The final rule will be effective 30 days after publication in the Federal Register. FSOC Final Rule.