The Treasury Department has asked Congress to give it more power “to resolve any large, interconnected financial firm in an orderly manner,” according to a fact sheet issued Thursday, July 23.
Treasury has drafted legislation that would allow it to appoint either the Federal Depository Insurance Corp. or the Securities and Exchange Commission as conservator or receiver for a “failing financial firm that poses a threat to financial stability,” according to the department.
“The conservator or receiver of the firm will have a broad set of powers including authority to take control of the operations of the firm and to sell or transfer all or any part of the assets of the firm,” the proposal states. “The resolution authority will also include the ability to provide loans, assume liabilities, or inject capital subject to checks and balances, and only if a systemic risk determination has been made.”
In addition, the Treasury proposal calls for having the Federal Reserve require that so-called Tier 1 financial holding companies—financial firms that are found to pose a threat to the economy’s financial stability because of their size, leverage and interconnectedness to the financial system—prepare and maintain a “credible plan for the rapid resolution of the firm in the event of severe financial distress.”
On Wednesday, July 22, the department issued a series of legislative drafts dealing with financial services regulatory reform, including one that would create an Office of National Insurance within the Treasury Department and another designed to enhance the regulation of entities that present a systemic risk to the economy.
Filed by Mark A. Hofmann of Business Insurance, a sister publication of Workforce Management. To comment, e-mail editors@workforce.com.
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