As Prepared for Delivery on November 3, 2023
Thank you, Secretary Yellen. And thank you as well to the Council’s and agencies’ staff for their work on these matters.
The Council’s work this year to reconsider the framework and process by which it might designate a non-bank financial company as “systemically important” was much needed.
Having worked on the drafting of the Dodd-Frank Wall Street Reform and Consumer Protection Act, I know that landmark law gave the Council a range of tools to address potential threats to financial stability. That toolkit includes the authority to designate a non-bank company for consolidated supervision and enhanced prudential standards by the Federal Reserve when circumstances warrant it.
The 2019 non-bank designation guidance was set up as an endless game of Chutes and Ladders. It needlessly hampered the Council’s ability to consider and use this important tool.
In contrast, today’s final guidance — which is balanced, clear, credible, and consistent — represents a substantial improvement. The new framework’s procedures will provide us a strategic, effective, and more rigorous approach in the designation process.
The financial market stresses experienced earlier this year clearly demonstrated that problems at one financial institution can develop rapidly and transmit stresses quickly. As a Council, we must be nimble and proactive in anticipating and mitigating those risks. That means a regulator and deliberate review of those entities that may pose system risk. And we need to use all available tools, including a non-bank designation, to address financial stability risks. That state of readiness and preparedness to act when needed will best allow the Council to fulfill its statutory mandate of protecting the financial system from systemic risks.
That’s a mandate I take seriously, and that’s why I strongly support this final analytical framework and interpretive guidance.