The Wall Street Journal (WSJ) reported on the 23rd that the US government is pushing to strengthen regulations on non-bank finance such as virtual currency exchanges and hedge funds, which are one step away from the strict supervision system applied to general banks.
Sources familiar with the matter told the WSJ that the U.S. Financial Stability Oversight Commission (FSOC) is reviewing a plan to reinforce regulations on non-banking financial companies by reversing the policy of the Donald Trump administration, which eased regulations on these companies.
As the risk of insolvency of non-bank financial companies such as cryptocurrency exchanges, hedge funds, asset management companies, insurance companies, and mortgage loan companies has recently increased, these measures are designed to make it easier to designate these companies as ‘systematically important financial institutions’ (SIFI). It is known that the focus is on
However, the FSOC’s work for this is still in its infancy, so the public opinion will be possible in a few months, the sources explained.
The SIFI designation was introduced because of a growing consensus on the need to strengthen supervision of non-banking financial companies while responding to the insolvency problems of AIG and Lehman Brothers during the 2008 global financial crisis.
The financial authorities have strengthened regulations on companies that are so large that they can damage the stability of the financial system if allowed to fail.
FSOC designated four companies as SIFIs during the Barack Obama administration: GE Capital, Prudential, AIG, and MetLife.
However, these companies were all released from the SIFI designation during the Trump administration. The Trump administration also revised the rules of the FSOC in 2019, making the requirements for SIFI designation more stringent.
By comparison, officials appointed by the Biden administration have already taken steps to tighten mutual fund regulation, and about half of the current FSOC members have spoken in recent weeks suggesting a willingness to revise the regulations created under the new Trump administration.
US Securities and Exchange Commission (SEC) Chairman Gary Gensler, who is pushing for new regulations on fund securitization this month, said that total assets of hedge funds and private equity funds have soared in recent years to reach $21 trillion (approximately 2.8 trillion won). The background was explained that the gap with the general banking sector was less than $ 2 trillion.