(Recasts, adds regulatory details, background on Treasury
secretary and financial industry)
By Lisa Lambert
WASHINGTON May 1 The heads of the U.S.
financial regulators will meet next week to dive into the
sensitive process of labeling companies "systemically
important," better known as "too big to fail."
The Financial Stability Oversight Council will discuss
President Donald Trump's April memorandum instructing the FSOC
chair, U.S. Treasury Secretary Steven Mnuchin, to examine how
the council makes the designations, according to a notice from
the U.S. Treasury on Monday.
The May 8 meeting will also address Trump's executive order
in February to review the 2010 Dodd-Frank Wall Street reform law
that created the council and designations, which were intended
to prevent a repeat of the 2007-2009 financial crisis and
recession. The order requires Mnuchin to submit possible
regulatory changes and legislation modifying Dodd-Frank by June
The council will also be briefed on a nonbank financial
company currently designated as too big to fail, which was not
identified. By law, the annual evaluations can lead to lifting a
company's designation. The meeting is closed to the public.
While Treasury's announcement did not name the firm to be
discussed, only two insurance companies, American International
Group, and Prudential Financial, currently have
Some companies are wary of the "systemically important"
designation because it forces them to hold on to capital and
creates extra oversight they say is burdensome.
Republican senators wrote to Mnuchin in March saying the
current designation process lacks transparency and consistency
and that the label creates additional costs for firms while
maintaining the possibility of a future bailout.
Proponents say the council of experts can identify banks and
nonbanks that are large enough to devastate the financial system
should they fall into distress. They argue the firms should be
required to take precautions to quarantine any possible
This will be the second FSOC meeting that Mnuchin has
chaired since he was confirmed in February.
The former Goldman Sachs Group Inc executive and
movie producer has expressed skepticism about the council,
saying during his confirmation hearings he would like to
investigate its workings.
AIG, which received a $182 billion government bailout during
the crisis, has recently taken steps to shrink. That could be
part of an attempt to shed the designation.
Meanwhile, MetLife Inc successfully fought in court
to have its designation removed. The FSOC appealed the decision,
and the largest U.S. life insurer recently asked to have the
case put on pause during Trump's review.
(Editing by Matthew Lewis)