1 

Financial Stability Oversight Council

Supplemental Procedures

Relating to Nonbank Financial Company Determinations

February 4, 2015

Background

Section 113 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the DoddFrank Act) authorizes the Financial Stability Oversight Council (the Council) to determine that a 

nonbank financial company shall be supervised by the Board of Governors of the Federal 

Reserve System and be subject to enhanced prudential standards if the Council determines that 

material financial distress at the company, or the nature, scope, size, scale, concentration, 

interconnectedness, or mix of the activities of the company, could pose a threat to the financial 

stability of the United States.

Over the last several months, as part of the Council’s ongoing evaluation of how it conducts its 

work, the Council has reviewed its practices related to the evaluation of nonbank financial 

companies under section 113 of the Dodd-Frank Act. This review included engagement with 

financial companies, trade associations, nonbank financial companies subject to previous 

Council determinations, public interest groups, and Congressional stakeholders. 

Based on this review, the Council has adopted the following procedures that the Council intends 

to use for determinations in non-emergency situations, to supplement its rule and interpretive 

guidance regarding nonbank financial company determinations (Rule and Guidance).1

 The 

Council will continue to work to identify and evaluate additional potential changes to its 

practices and procedures that would promote active engagement with companies under 

consideration for a determination and transparency to the public. 

The Rule and Guidance provide a detailed description of the analysis that the Council intends to 

conduct, and the processes and procedures that the Council intends to follow, during its review 

of nonbank financial companies. In the Rule and Guidance, the Council created a three-stage 

process for identifying companies for determinations. Each stage of the process involves an 

analysis based on an increasing amount of information to determine whether a company meets 

one of the statutory standards for a determination. In the first stage of the process (Stage 1), the 

Council applies six quantitative thresholds (described in the Rule and Guidance) to a broad group 

of nonbank financial companies to identify a set of companies that merit further evaluation. In 

Stage 2, the Council conducts a preliminary analysis of the potential for the companies identified 

in Stage 1 to pose a threat to U.S. financial stability. Based on the analysis conducted during 

Stage 2, the Council identifies companies that merit further review in Stage 3, which builds on 

the Stage 2 analysis with additional quantitative and qualitative analyses. The Council may 

make a proposed determination regarding a company based on the results of the analyses 

conducted during this three-stage review. If the Council makes a proposed determination, the 

 

1 Authority to Require Supervision and Regulation of Certain Nonbank Financial Companies, 12 C.F.R. part 1310 

(2013).
2 

Council provides the company with notice and an explanation of the basis of the proposed 

determination. The company may request a hearing to contest the proposed determination. After 

any hearing, the Council may make a final determination regarding the company.

The Council’s evaluation of nonbank financial companies is supported by the staff-level 

Nonbank Financial Company Designations Committee (Nonbank Designations Committee). The 

Nonbank Designations Committee is overseen by the Council’s Deputies Committee, which is 

composed of one representative from the staff of each Council member or member agency.

The procedures described below supplement the Rule and Guidance, and are organized into three 

categories: engagement during evaluations for potential determinations; engagement during 

annual reevaluations of determinations; and transparency to the public. 

Engagement During Evaluations for Potential Determinations 

Engagement with Companies

• The Council’s practice has been to notify a nonbank financial company under evaluation 

only if the company is advanced to Stage 3. The Council now will notify a nonbank 

financial company within 30 days after the Deputies Committee instructs the Nonbank 

Designations Committee to form an analytical team to commence an active review of the 

company in Stage 2. Prior to approving a company for active review, the Deputies 

Committee will consider any preliminary information gathered by the Nonbank 

Designations Committee. 

• A company under active review in Stage 2 may submit to the Council any information it 

deems relevant to the Council’s evaluation and may, upon request, meet with analytical 

team staff. In addition, analytical team staff will, upon request, provide the company 

with a list of the primary public sources of information being considered during the Stage 

2 analysis, so that the company has an opportunity to understand the information the 

Council may rely upon during Stage 2. 

• If the Council votes to not advance a company from Stage 2 to Stage 3, the Council will 

notify the company in writing of the Council’s decision. The notice will clarify that a 

vote not to advance the company from Stage 2 to Stage 3 at that time does not preclude 

the Council from notifying the company in the future that it is again under active 

consideration in Stage 2. 

• If the Council votes to advance a company from Stage 2 to Stage 3, the Council’s current

practice is to provide the company with an opportunity to submit written materials to the 

Council to contest the Council’s consideration of the nonbank financial company for a 

proposed determination. In addition, analytical team staff will now meet with the 

company’s representatives at the start of Stage 3 to explain the evaluation process and the 

framework for the Council’s analysis. If the analysis in Stage 2 has identified specific 

aspects of the company’s operations or activities as the primary focus for the evaluation, 

staff will notify the company of those issues, although the issues will be subject to change 

based on the ongoing analysis. After this meeting, the Council will provide the company 

with a request for information that will generally indicate how the requested items relate 
3 

to the Council’s framework for analyzing potential risks described in the Rule and 

Guidance. 

• Consistent with the Council’s current practice, during Stage 3, a company may submit to 

the Council any information it deems relevant to the Council’s evaluation and may 

request meetings with analytical team staff regarding any issue the company deems 

appropriate. 

• The Council’s Deputies Committee will grant a request to meet with a company in 

Stage 3 on a mutually agreed-upon date, subject to receiving the request at least 30 days 

prior to the proposed meeting, to allow the company to present any information or 

arguments it deems relevant to the Council’s evaluation. 

• Pursuant to the Dodd-Frank Act, the Council can, in its sole discretion, determine 

whether to grant a request for an oral hearing for any company subject to a proposed 

determination. The Council intends to grant any timely request for an oral hearing from a 

company subject to a proposed determination, and for any such hearing to be conducted 

by the Council members. 

Engagement with Existing Regulators

Under the Dodd-Frank Act, the Council must consult with the primary financial regulatory 

agency, if any, for each nonbank financial company or subsidiary of a nonbank financial 

company that is being considered for a determination before the Council makes any final 

determination with respect to such company. The Council’s practice has generally been to begin 

the consultation process in Stage 2 with the primary financial regulatory agencies or home 

country supervisors, as appropriate, and to consult in Stage 3 with such regulators in a timely 

manner before the Council makes any final determination with respect to the company.

• For any company under active review in Stage 2 that is regulated by a primary financial 

regulatory agency or home country supervisor, the Council will notify such regulator or 

supervisor that the company is under active review no later than such time as the 

company is notified. The Council will seek to begin the consultation process with such 

regulator or supervisor during Stage 2, before the Council votes on whether to advance 

the company to Stage 3. 

• In addition, if the Council votes to advance a company to Stage 3, the Council will seek 

to continue its consultation with such regulator or supervisor during Stage 3, before 

voting on whether to make a proposed determination regarding the company. 

• Further, for any company regulated by a primary financial regulatory agency or home 

country supervisor, promptly after the Council votes to make a proposed or final 

determination regarding the company, the Council will provide such regulator or 

supervisor with the nonpublic written explanation of the basis of the Council’s proposed 

or final determination. 
4 

Engagement During Annual Reevaluations of Determinations

• The Council reevaluates each of its determinations not less than annually and will rescind 

a determination if it determines that the company no longer meets the statutory standards 

for a determination. Before the Council’s annual reevaluation of a nonbank financial 

company subject to a Council determination, the company will be provided an 

opportunity to meet with staff on the Nonbank Designations Committee to discuss the 

scope and process for the review and to present information regarding any change that 

may be relevant to the threat the company could pose to financial stability, including a 

company restructuring, regulatory developments, market changes, or other factors. 

• If a company contests its determination during the Council’s annual reevaluation, the 

Council intends to vote on whether to rescind the determination and provide the 

company, its primary financial regulatory agency, and the primary financial regulatory 

agency of its significant subsidiaries with a notice explaining the primary basis for any

decision not to rescind the determination. The notice will address the material factors 

raised by the company in its submissions to the Council contesting the determination 

during the annual reevaluation. 

• The Council will provide each company subject to a determination an opportunity for an 

oral hearing before the Council once every five years at which the company can contest 

the determination. 

Transparency to the Public 

• The Council’s practice has been not to publicly announce the name of any nonbank 

financial company that is under evaluation for a determination prior to a final 

determination with respect to such company. However, if a company that is under active 

review in Stage 2 or that has been advanced to Stage 3 publicly announces the status of 

its review by the Council, the Council now intends, upon the request of a third party, to 

confirm the status of a company’s review. 

• When the Council makes a final determination, it provides the company with a detailed 

statement of the basis for the Council’s decision and publicly releases a written 

explanation of the basis for the final determination. The Council is subject to statutory 

and regulatory requirements to maintain the confidentiality of certain information 

submitted to it by a nonbank financial company under review for a potential 

determination.

2

 As a result, the Council’s public basis cannot include confidential 

information that was submitted by a company to the Council in connection with the 

Council’s evaluation of the company. Nevertheless, the Council is committed to 

continuing to set forth sufficient information in its public bases to provide the public with 

an understanding of the Council’s analysis while protecting sensitive, confidential 

information submitted by the company to the Council. 

 

2 See Dodd-Frank Act section 112(d)(5), 12 U.S.C. § 5322(d)(5); 12 C.F.R. part 1310.20(e).
5 

• The Council also will publish in its annual reports the numbers of nonbank financial 

companies that, since the publication of the Council’s prior annual report, (1) the Council 

voted to advance to Stage 3, (2) the Council voted not to advance to Stage 3, (3) became 

subject to a proposed or final determination, and (4) in the aggregate are subject to a final 

determination at that time. 

• In addition, the Council will in the coming months publish on its website further details 

explaining how the Stage 1 thresholds are calculated, which may address issues such as 

how the Council evaluates the use of various accounting standards for purposes of Stage 

1; components of the six Stage 1 thresholds; and practices for calculating the thresholds 

when incomplete data regarding a company are available.