Crapo Rips Systemic Risk Council’s Process for Nonbanks

Stay up-to-date with the latest developments in securities law through access to both news and all statutes and regulations. Find relevant corporate filings through a searchable EDGAR database. And...

By Rob Tricchinelli

Senate Banking Committee Chairman Mike Crapo (R-Idaho) sharply criticized the process used by a panel of federal regulators to label large nonbanks as “systemically important,” which subjects them to extra regulation.

“The designation process lacks transparency and accountability,” he said April 27 at a Women in Housing and Finance symposium in Washington. “It insufficiently tracks data and does not have a consistent methodology for determinations, and this undermines the public’s and the market’s confidence.”

His comments echo other Republican lawmakers’ criticism of the Financial Stability Oversight Council and indicate that changes to the designation process could be a priority as the Senate works on its version of a Dodd-Frank Act overhaul.

The 2010 law established the FSOC to manage systemic risk across the financial sector, but Republicans have said it has too much power and lacks predictability in its decision-making.

President Donald Trump ordered the Treasury Department to review the FSOC’s processes, a move Crapo endorsed. Crapo met April 27 with Treasury Secretary Steven Mnuchin and said Mnuchin promised the review would be complete by the fall deadline.

Dodd-Frank Revamp

The House is poised to pass a wide-ranging bill to revamp Dodd-Frank, the Financial Choice Act (H.R. 10), and although Crapo praised the House Financial Services Committee for its work, he stopped short of a full endorsement of the bill.

Crapo said he wants to push bipartisan legislation first. The House bill is unlikely to gain much, if any, Democratic support.

The Senate Banking Committee is making it a priority to frame any changes to Dodd-Frank in terms of creating economic growth, Crapo said. The panel has solicited proposals from the public and financial industry stakeholders.

“We will have a very full array of options in front of us,” he said, noting that the Choice Act is only one option.

“I cannot tell you what will be the content of our package,” Crapo said. “If we can’t get there on a bipartisan basis, we’ll have to look at other steps.”

Housing finance is more ripe for a bipartisan deal, he said as an example, than making changes to the Consumer Financial Protection Bureau.

To contact the reporter on this story: Rob Tricchinelli in Washington at rtricchinelli@bna.com

To contact the editor responsible for this story: Phyllis Diamond at pdiamond@bna.com

Copyright © 2017 The Bureau of National Affairs, Inc. All Rights Reserved.

Request Securities & Capital Markets on Bloomberg Law