The U.S. House of Representatives passed a bill that would clarify the process of determining whether a financial firm is systemically important to the financial system.
Specifically, the legislation requires FSOC to work with a company and its primary regulator to mitigate risks associated with its business activities before designating the company as a Systemically Important Financial Institution (SIFI).
The Council is charged by statute with identifying risks to the financial stability of the United States; promoting market discipline; and responding to emerging threats to the stability of the U.S. financial system.
“Since FSOC was created, lawmakers and administration officials have debated the process of determining if a firm poses a risk to our financial system,” Rep. Bill Foster’s (D-IL), the bill’s sponsor. said. “Past efforts by FSOC to designate firms’ risk levels have been controversial or short-lived. This bipartisan legislation strengthens FSOC’s ability to identify and address emerging threats to financial stability and consumers by promoting a more consistent, accountable, and effective approach to oversight.”
The bill now heads to the U.S. Senate for consideration.