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Minutes of the Financial Stability Oversight Council

Held January 31, 2013

PRESENT: 

Neal S. Wolin, Acting Secretary of the Treasury and Chairperson of the Financial Stability 

Oversight Council (Council)

Ben Bernanke, Chairman, Board of Governors of the Federal Reserve System (Federal Reserve)

Martin J. Gruenberg, Chairperson, Federal Deposit Insurance Corporation (FDIC) 

Elisse Walter, Chairman, Securities and Exchange Commission (SEC) 

Gary Gensler, Chairman, Commodity Futures Trading Commission (CFTC) 

Richard Cordray, Director, Consumer Financial Protection Bureau (CFPB)

Edward DeMarco, Acting Director, Federal Housing Finance Agency (FHFA)

Debbie Matz, Chairman, National Credit Union Administration (NCUA)

Thomas J. Curry, Comptroller of the Currency, Office of the Comptroller of the Currency (OCC)

Roy Woodall, Independent Member with Insurance Expertise

Richard Berner, Office of Financial Research, Department of the Treasury (non-voting member)

Michael McRaith, Director, Federal Insurance Office, Department of the Treasury (non-voting 

member)

John P. Ducrest, Commissioner, Louisiana Office of Financial Institutions (non-voting member)

John Huff, Director, Missouri Department of Insurance, Financial Institutions, and Professional 

Registration (non-voting member) (participating by phone)

David Massey, Deputy Securities Administrator, North Carolina Department of the Secretary of 

State, Securities Division (non-voting member) 

GUESTS: 

Department of the Treasury 

Mary J. Miller, Under Secretary for Domestic Finance

Lael Brainard, Under Secretary for International Affairs

Amias Gerety, Deputy Assistant Secretary for FSOC

Christopher J. Meade, Acting General Counsel

Board of Governors of the Federal Reserve System 

Daniel K. Tarullo, Governor

Nellie Liang, Director, Office of Financial Stability Policy and Research

Federal Deposit Insurance Corporation 

Jason Cave, Deputy Director for Complex Financial Institutions Monitoring

Securities and Exchange Commission 

Sara Cortes, Counsel to the Chairman

Commodity Futures Trading Commission

Gary Barnett, Director, Division of Swap Dealer and Intermediary Oversight 
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Consumer Financial Protection Bureau

Ashwin Vasan, Senior Advisor

Federal Housing Finance Agency 

Mario Ugoletti, Special Advisor to the Director

National Credit Union Administration 

John Worth, Chief Economist

Office of the Comptroller of the Currency 

John Lyons, Senior Deputy Comptroller and Chief National Bank Examiner

Office of the Independent Member with Insurance Expertise

Diane Fraser, Senior Policy Advisor

Federal Reserve Bank of New York

William Dudley, President and Chief Executive Officer 

Office of Financial Research

Matthew Reed, Chief Counsel

Federal Insurance Office

John Nolan, Senior Policy Advisor

Louisiana Office of Financial Institutions

Mike Stevens, Senior Executive Vice President, Conference of State Bank Supervisors

Missouri Department of Insurance, Financial Institutions, and Professional Registration 

Elise Liebers, Special Advisor, National Association of Insurance Commissioners

North Carolina Department of the Secretary of the State, Securities Division

Joseph Brady, General Counsel, North American Securities Administrators Association

PRESENTERS:

Macro-environment Overview: Fiscal Developments

• Neal S. Wolin, Acting Secretary of the Treasury and Chairperson of the Council

Customer Protection 

• Gary Gensler, Chairman, CFTC

• Gary Barnett, Director, Division of Swap Dealer and Intermediary Oversight, CFTC
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The Council’s Annual Report 

• Tobias Adrian, Vice President and Function Head, Capital Markets Function, 

Federal Reserve Bank of New York

• Trent Reasons, Senior Policy Advisor, Treasury

Nonbank Financial Company Designations: Consideration of the Advancement of a Subset of 

Nonbank Financial Companies Considered in Stage 2 to Stage 3

• Ralph Monaco, Senior Economist, NCUA

International Association of Insurance Supervisors (IAIS) Update

• Michael McRaith, Director, Federal Insurance Office, Treasury

Nonbank Financial Company Designations Stage 3 Analysis Update 

• Patrick Pinschmidt, Executive Director of the Council, Treasury

• Todd Cohen, Policy Advisor, Treasury 

• John Nolan, Senior Advisor, Federal Insurance Office, Treasury 

• Diane Fraser, Senior Policy Advisor, Office of the Independent Member 

• Jose Berrospide, Economist, Federal Reserve

Cyber Security

• Leigh Williams, Director, Office of Critical Infrastructure Protection and 

Compliance Policy, Treasury

• Wayne Pacine, Interagency Project Manager, Federal Reserve 

• Marlene Roberts, Senior Specialist, Critical Infrastructure Protection, FDIC

Executive Session 

The Chairperson called the executive session of the meeting of the Financial Stability Oversight 

Council to order at approximately 10:30 A.M. (EST). He began by welcoming the new 

Chairman of the SEC, Elisse Walter, and the newly confirmed Director of the Office of Financial 

Research, Richard Berner, to the meeting. 

The Chairperson then outlined the meeting agenda, which had been previously distributed to the 

members together with copies of the resolutions and other materials. The agenda for the meeting 

included the following subjects: (1) fiscal developments; (2) customer protection; (3) the 

Council’s annual report; (4) nonbank financial company designations and consideration of the 

advancement of a subset of nonbank financial companies that were considered in stage 2 to stage 

3 of the evaluation process; (5) an update on the work of the IAIS; (6) an update on the nonbank 

financial company designations stage 3 analysis; (7) cyber security; and (8) consideration of, and 

a vote on, a resolution approving the minutes of the Council’s meeting on December 13, 2012.

1. Macro-environment Overview: Fiscal Developments Update 

The Chairperson turned to the first agenda item and provided the Council with an update on 

recent fiscal developments, including an update on fiscal negotiations. After the update from the 

Chairperson, members of the Council asked questions and had a discussion. 
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2. Customer Protection

The Chairperson then called on Gary Gensler, Chairman of the CFTC, to give a presentation on

the CFTC’s customer-protection efforts. Gary Barnett, Director of the Division of Swap Dealer 

and Intermediary Oversight at the CFTC, was available to answer questions. Chairman Gensler 

provided background on the protection of customer funds by futures commission merchants, 

including permitted investments and the types of accounts in which funds are held. He also 

explained reforms completed by the CFTC and self-regulatory organizations in 2012 and 

discussed further CFTC rulemaking, including proposed rules that the CFTC intends to finalize 

in 2013. After the presentation, members of the Council asked questions and had a discussion. 

3. The Council’s Annual Report 

The Chairperson then introduced the agenda item regarding planning for the Council’s 2013 

annual report and asked Tobias Adrian, Vice President and Function Head, Capital Markets 

Function at the Federal Reserve Bank of New York, and Trent Reasons, Senior Policy Advisor at 

Treasury, to give the presentation. Mr. Adrian and Mr. Reasons reported that the Council’s 2013 

annual report is currently under development and outlined the general timeline and proposed 

structure of the report. After the presentation, members of the Council asked questions and had a 

discussion. 

4. Nonbank Financial Company Designations: Consideration of the Advancement of a 

Subset of Nonbank Financial Companies Considered in Stage 2 to Stage 3

The Chairperson next called on Ralph Monaco, Senior Economist at the NCUA, to present on a 

subset of nonbank financial companies that were considered in stage 2 of the evaluation process 

for designation and were being considered for advancement or non-advancement to stage 3. 

After the presentation, members of the Council asked questions and had a discussion. The 

Chairperson then presented to the Council the following resolution approving the nonadvancement to stage 3 of a subset of nonbank financial companies that were considered in stage 

2 of the evaluation process. 

“WHEREAS, section 113 of the Dodd-Frank Wall Street Reform and Consumer Protection Act 

(the “DFA”) 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 (the “Federal Reserve”) and shall be subject to enhanced prudential standards 

if the Council determines that material financial distress at the nonbank financial company, or 

the nature, scope, size, scale, concentration, interconnectedness, or mix of the activities of the 

nonbank financial company, could pose a threat to the financial stability of the United States; 

and 

WHEREAS, in making a determination under section 113 of the DFA, the Council must take into 

consideration the following: (A) the extent of the leverage of the company; (B) the extent and 

nature of the off-balance-sheet exposures of the company; (C) the extent and nature of the 

transactions and relationships of the company with other significant nonbank financial 

companies and significant bank holding companies; (D) the importance of the company as a 
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source of credit for households, businesses, and State and local governments and as a source of 

liquidity for the United States financial system; (E) the importance of the company as a source of 

credit for low-income, minority, or underserved communities, and the impact that the failure of 

such company would have on the availability of credit in such communities; (F) the extent to 

which assets are managed rather than owned by the company, and the extent to which ownership 

of assets under management is diffuse; (G) the nature, scope, size, scale, concentration, 

interconnectedness, and mix of the activities of the company; (H) the degree to which the 

company is already regulated by one or more primary financial regulatory agencies; (I) the 

amount and nature of the financial assets of the company; (J) the amount and types of the 

liabilities of the company, including the degree of reliance on short-term funding; and (K) any 

other risk-related factors that the Council deems appropriate; and

WHEREAS, the Council issued a final rule and accompanying interpretive guidance (the 

“Interpretive Guidance”), codified at 12 C.F.R. Part 1310, that describes the criteria and the 

processes and procedures by which the Council will determine that a nonbank financial 

company shall be supervised by the Federal Reserve and shall be subject to enhanced prudential 

standards under the DFA; and

WHEREAS, the Interpretive Guidance describes a three-stage process that the Council expects 

to use for evaluating a nonbank financial company prior to a Council vote on a proposed 

determination; and

WHEREAS, the staffs of the Council Members and their Agencies have evaluated nonbank 

financial companies under stage 1, which consisted of the application of uniform quantitative 

thresholds to identify nonbank financial companies for further evaluation; and

WHEREAS, in stage 2, the staffs of the Council Members and their Agencies have analyzed 

certain of the nonbank financial companies identified in stage 1, based on a wide range of 

quantitative and qualitative information available to the Council, primarily through public and 

regulatory sources; and

WHEREAS, based on the stage 2 evaluations, the staffs of the Council Members and their 

Agencies recommend that the Council not, at this time, approve the advancement of a subset of 

the nonbank financial companies that were considered in stage 2 to stage 3 of the evaluation 

process.

NOW, THEREFORE, BE IT RESOLVED, that a subset of nonbank financial companies that 

were considered in stage 2 (identified in an attachment hereto) will not, at this time, be advanced 

to stage 3 of the evaluation process, but shall be evaluated by the Nonbank Designations 

Committee from time to time, as appropriate, in accordance with sections 112 and 113 of the 

DFA and the Interpretive Guidance.” 

The Chairperson asked for a motion approving the resolution, which was made and seconded. 

The Council then approved the resolution by unanimous vote.
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5. IAIS Update

The Chairperson turned to the next agenda item and called on Michael McRaith, Director of the

Federal Insurance Office at Treasury, to give the presentation. Mr. McRaith provided an update 

on the IAIS’s process and timeline for the designation of global systemically important insurers. 

After the presentation, members of the Council asked questions and had a discussion. 

6. Nonbank Financial Company Designations Stage 3 Analysis Update

The Chairperson then addressed the agenda item regarding an update on the analysis being 

conducted regarding a subset of nonbank financial companies that the Council previously had 

advanced to stage 3 of designation process, and asked Patrick Pinschmidt, Executive Director of 

the Council at Treasury, to give the presentation. Todd Cohen, Policy Advisor at Treasury; John 

Nolan, Senior Advisor in the Federal Insurance Office at Treasury; Diane Fraser, Senior Policy 

Advisor in Office of the Independent Member; and Jose Berrospide, Economist at the Federal 

Reserve, were available to answer questions. Mr. Pinschmidt provided an update on the status of 

the process and timing regarding possible proposed designations. He also discussed the statutory 

standard for designation and the analytic framework. After the presentation, members of the 

Council asked questions and had a discussion.

7. Cyber Security

The Chairperson turned to the next agenda item and called on Leigh Williams, Director of the 

Office of Critical Infrastructure Protection and Compliance Policy at Treasury, to give a 

presentation on cyber security. Wayne Pacine, Interagency Project Manager at the Federal 

Reserve, and Marlene Roberts, Senior Specialist for Critical Infrastructure Protection at the 

FDIC, were available to answer questions. Mr. Williams explained how cyber attacks are 

assessed. He also discussed the responses of industry and the U.S. government to cyber attacks. 

After the presentation, members of the Council asked questions and had a discussion. 

8. Resolution Approving the Minutes of the Meeting held on December 13, 2012

“BE IT RESOLVED, by the Financial Stability Oversight Council (the “Council”), that the 

minutes attached hereto of the meeting held on December 13, 2012 of the Council are hereby

approved.” 

The Chairperson asked for a motion to approve the resolution, which was made and seconded. 

The Council approved the resolution by unanimous vote.

The Chairperson asked for a motion to adjourn the meeting, and the Council voted to adjourn. 

The Chairperson adjourned the meeting at approximately 12:38 P.M. (EST).