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The Trump administration is recommending a series of Wall Street-friendly changes to the way big financial institutions are assessed as potential “too big to fail” threats to financial stability.
Releasing the results of work commissioned by President Donald Trump, the US Treasury department on Friday said regulators should undertake more rigorous analysis and consider costs before labeling any group as a stability threat.
The recommendations matter to Prudential, the only non-bank currently designated as a “systemically important financial institution” or Sifi, and to insurers and others that could be assessed in the future.
The Treasury department said regulators that make Sifi designations should include “the likelihood of a firm’s material financial distress as part of [their] analysis” and should only designate a company if the expected benefits outweigh the costs.
The designations are handled by a group of the US’s top regulators known as the Financial Stability Oversight Council.
The Treasury also said FSOC should “enhance” its communication with companies under review. A Sifi designation results in institutions being subject to much stricter supervision by federal regulators.
In September US officials rescinded AIG’s designation as systemically important. Last year MetLife won a prolonged legal battle to throw off its designation.
The recommendations will be considered at the next FSOC meeting.