§5323 Authority to require supervision and regulation of certain nonbank financial companies

Summary

The Council must decide itself, by a vote of at least two-thirds of its members and with the Chairperson voting yes, whether a U.S. nonbank financial company should be put under the supervision of the Board of Governors and made to follow prudential standards when the company’s distress, or the size, scope, mix, or connectedness of its activities, could threaten U.S. financial stability. In making that decision the Council must look at factors such as the company’s leverage; off-balance-sheet exposures; dealings with other big financial firms; how important it is as a source of credit or liquidity for households, businesses, state and local governments, and low-income or underserved communities; whether it mainly manages rather than owns assets; the company’s size, complexity, concentration, and interconnectedness; how much it is already regulated; the amount and type of its financial assets and liabilities (including short-term funding); and any other risk-related factors the Council finds relevant. The same power and factors apply to foreign nonbank firms, but with focus on their U.S.-related exposures and whether their home country already applies comparable rules. To stop evasion, the Council may also decide that particular financial activities of a company must be supervised, and it can require an intermediate holding company to carry those activities under Board supervision. Financial activities here means activities that are financial in nature (includes owning or controlling insured banks but excludes internal treasury, investment, and employee-benefit functions). The Council must review each determination at least once a year and can remove it by the same two-thirds vote with the Chair’s yes. Before a final decision, the Council must give written notice to the company, which has 30 days to request a hearing; the Council must schedule a hearing within 30 days of the request and issue a final decision within 60 days after the hearing (or within 10 days after the hearing-request deadline if no hearing is requested). The Council may waive or shorten these notice and hearing rules if needed to prevent or reduce a threat, but must notify the company within 24 hours and allow a hearing request within 10 days. The Council must consult relevant regulators (including foreign regulators for foreign firms) before finalizing a decision. A company may sue in federal district court within 30 days after receiving the final determination; the court’s review is limited to whether the decision was arbitrary and capricious.