The Financial Stability Oversight Council ("FSOC") rescinded its determination that material financial distress at Prudential Financial, Inc. ("Prudential") could present a threat to U.S. financial stability. As a result of the FSOC's decision, Prudential will no longer be subject to enhanced prudential standards. As a consequence of this determination, no non-bank financial company is deemed to be "systemically important."
In submissions to FSOC, Prudential argued that internal changes in its operations, and external changes affecting it, meant that material financial distress would not harm the U.S. economy. Prudential also argued that FSOC's prior analyses concerning the scale of potential insurance policyholder withdrawals and the potential for a resulting fire sale of assets were flawed.
Commentary / Steven Lofchie
It is all to the good that FSOC has removed all SIFI designations. It would be even better if Congress would repeal those provisions of Dodd-Frank allowing FSOC to designate institutions as SIFIs on the basis of standards that are completely open-ended and discretionary. Financial regulation, indeed regulation of any kind, ought not to operate on the basis of discretionary standards. See, e.g., Republican Staff Rips into "SIFI" Designation Process.
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