WASHINGTON (Reuters) - A group of
Republican lawmakers demanded documents on Friday from U.S. regulators,
voicing concerns that decisions about whether to designate large
financial companies as systemically risky are unduly influenced by an
international body.
Senior members of the House of Representatives' Financial Services
Committee said in a letter that they fear the United States may end
up surrendering on financial regulatory matters to the Financial
Stability Board, a group they referred to as an "international old
boys club that deliberates in secret."
The letter was sent to Treasury Secretary Jack Lew, Federal Reserve
Chair Janet Yellen, and Mary Jo White, the chair of the Securities
and Exchange Commission.
Lew, Yellen and White are all members of the Financial Stability
Oversight Council, a U.S. regulatory body that is charged with
policing the market for emerging risks.
The 2010 Dodd-Frank law gave the group the power to dub large
financial companies as "systemically" risky if their failure could
cascade through the marketplace. Any company deemed systemic is
subject to stricter oversight by the Fed.
The FSOC has already given three companies this tag - American
International Group Inc, General Electric Co's GE Capital and
Prudential Financial Inc.
Now, the council is reviewing whether large asset managers such as
BlackRock Inc and Fidelity should be next.
Republicans on Capitol Hill say the FSOC operates in a black box and
makes ill-fated and poorly informed decisions that could harm U.S.
companies.
They are also worried designation decisions are driven by the
Financial Stability Board - an international regulatory arm of the
Group of 20 leading economies that is based in Basel, Switzerland.
The Financial Stability Board, which includes Fed Governor Daniel
Tarullo as a participating member, has gone ahead of the FSOC with
guidelines for systemic designations by its member nations'
regulators.
For instance, the group published proposed criteria for designating
mutual funds that, if finalized, would capture 12 to 14 U.S. funds.
It sought public comments on the plan and is now weighing whether
certain companies should be deemed globally risky.
U.S. regulators do not have to accept the global group's suggestions
of which companies to designate for tougher supervision here. But
Republicans say they fear the input sways the decision-making
process.
"We have concerns that decisions are being made that could have
significant impact on the U.S. economy and its citizens through a
non-transparent process by an international body that is not
accountable to the American people," wrote Financial Services
Committee Chairman Jeb Hensarling and five other Republicans on the
panel.
They asked for copies of all memos and drafts exchanged between U.S.
officials and several international groups that are represented on
the Financial Stability Board concerning the methods the global
group uses to designate companies.
A Treasury spokeswoman said: "We received the letter and will
respond in due course."
(Reporting by Sarah N. Lynch; Editing by Mohammad Zargham)
