(Bloomberg News) Hedge funds, broker-dealers and mortgage companies may face unprecedented demands for data on everything from risk exposure to trading partners as U.S. regulators seek to identify firms that pose a potential threat to the financial system, a confidential government report says.
The staff of the Financial Stability Oversight Council identified dozens of "potential metrics" to decide which non-bank financial firms should be designated "systemically important" and subject to Federal Reserve supervision, according to an 80-page study obtained by Bloomberg News.
For example, insurance companies might be asked to divulge their derivatives exposure and the names of principal creditors, according to the study. Asset managers might have to submit a new form, dubbed PF for private funds, with details of their gross exposure, ties to other firms and portfolio risk as measured in stress tests.
"The FSOC will be after a lot of information," Amy Friend, managing director of Promontory Financial Group in Washington, said at a Feb. 25 seminar at the U.S. Chamber of Commerce. "The Fed may come knocking on some doors, and people need to know how to talk to the Fed." Friend is former chief counsel of the Senate Banking Committee, where she worked on the Dodd-Frank bill that created the council.
The council, charged with averting another financial crisis, will collect data that can be used to force firms to raise capital, increase liquidity and sell assets deemed too concentrated in any segment of the economy. Industry groups for hedge funds, mutual funds and insurance companies are lobbying to avoid being designated systemically important.
Draft Report
The study is "a draft report and should be treated as a draft report," Treasury spokesman Steve Adamske said yesterday. He said the Treasury would have no further comment until draft rules are released.
The council, whose members include Fed Chairman Ben S. Bernanke and Treasury Secretary Timothy F. Geithner, may begin making its designations of non-bank financial companies by midyear.
The Feb. 3 report offers a glimpse of issues the council will consider without making recommendations. Some of its contents were first reported by Bloomberg on Feb. 17.
A list of metrics dated Jan. 26 and marked "draft/sensitive/confidential" covers eight categories of non-bank firms. Some, such as community development financial institutions, are considered unlikely to pose a broad threat. Others, like insurance companies and asset managers, are flagged for further study.
Private Equity