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Financial Stability Oversight Council establishes procedures for SIFI appeal

The Financial Stability Oversight Council approved procedures to deal with large firms attempting to remove their systemically important financial institution labels imposed by the postcrisis Dodd-Frank financial regulatory framework.

Under the procedures adopted at its March 13 hearing, the FSOC would provide notice of a hearing to any company appealing its SIFI status. The company could request an oral hearing in addition to a written hearing. The FSOC chair, who is also the U.S. Treasury Secretary, would then appoint a "hearing clerk" that will serve as the point person for hearings during the appeal process.

The FSOC maintains that all information or materials submitted would remain confidential, although the Council's existing rules regarding the Freedom of Information Act would still apply. The FSOC also added that the Council would be allowed to dismiss any hearing if the petitioner fails to submit requested materials on time.

The procedures create the groundwork for the FSOC to entertain a SIFI appeal under Dodd-Frank's "Hotel California" provision, which requires the Federal Reserve to apply enhanced prudential standards on any company that accepted Troubled Asset Relief Program funds and had more than $50 billion in total assets as of Jan. 1, 2010. Although the FSOC has not provided a reason for the adopted procedures, Salt Lake City-based Zions Bancorp. has launched efforts to shed the Fed as a primary regulator by scrapping its holding company and filing an appeal with the FSOC.

The new procedures are aimed at addressing Zions and other banks that may attempt to reorganize, and not at insurers like Metlife, which litigated its SIFI status. FSOC is also currently reviewing Prudential's SIFI status.