June 25, 2014
WASHINGTON – U.S. Senator Mike Crapo (R-Idaho), Ranking Member of the Senate Banking, Housing and Urban Affairs Committee, today delivered the following remarks during the Financial Stability Oversight Council’s annual report to Congress:
Thank you, Mr. Chairman. I look forward to Secretary Lew’s testimony on FSOC’s 2014 annual report. This year’s report covers many areas of the Council’s activities and lists a number of potential emerging threats to the financial stability of the United States.
One of the issues highlighted in the report is the need for a broad reform of the housing finance system, and the return of private capital into mortgage finance. We have referred bipartisan legislation out of this Committee, and Chairman Johnson and I continue to engage with our colleagues on this important issue.
I said this at the last FSOC hearing and I will repeat it today: the U.S. capital markets must remain the preferred destination for investors throughout the world. Unfortunately, regulatory uncertainty, and infighting among U.S. financial regulators and with their overseas counterparts are causing investors to look elsewhere. I encourage Secretary Lew to lead an effort among the FSOC members to identify other measures Congress should consider to ensure that our financial markets remain competitive.
The frustration from foreign regulators over the lack of international coordination on financial reform is an on-going concern. The European Commission just announced that it will grant equivalence to foreign clearing house rules in Australia, Hong Kong, India, Japan and Singapore – but not the U.S., in what some observers view as regulatory backlash. Last year, I suggested that Secretary Lew engage with foreign regulators to address cross-border conflicts and the unnecessary costs imposed by them. I look forward to hearing about the progress Secretary Lew has made in that area.
I continue to have concerns about the lack of transparency of FSOC’s process for designating non-bank systemically important financial institutions, or SIFIs. I have requested the Government Accountability Office to review FSOC’s non-bank SIFI-designation process, and look forward to reviewing that report when it is finalized later this summer.
There must be a transparent and measurable process to determine whether or not companies could become SIFIs. In order to make that determination, everyone needs to know what criteria the FSOC is using. The FSOC should either publish such criteria in the Federal Register for public comment, or, at the very least, specify in great detail why each of the already designated non-bank SIFIs qualified. Unfortunately, the publicly-released documents designating the three non-bank SIFIs to date have provided little useful insight into the specific criteria FSOC used.
The SIFI designation process cannot take place in a black box – too much is at stake. That is why FSOC must be accountable and in full public view.
Lastly, I am concerned that the report on the asset management firms issued by the Office of Financial Research (OFR) last fall does not properly account for the role asset managers play in our financial system. The Securities and Exchange Commission’s decision to put the OFR report out for public comment was a good step toward transparency and giving the public the opportunity to comment.
I encourage Secretary Lew to consider making non-bank SIFI designation criteria also available for public comment. I look forward to discussing these issues at today’s hearing.
Thank you, Mr. Chairman.