By Denny Gulino

WASHINGTON (MNI) – The perhaps least-desired Washington honor was
bestowed on eight financial market firms Wednesday, all of which will
now face additional risk management requirements compliments of the
nation’s new most powerful financial regulatory presence, the Financial
Stability Oversight Council.

As the group’s meeting began Wednesday afternoon, the firms had not
yet been informed that they are now officially designated as
systemically important, bringing them into the regulatory spotlight in a
way that could prove to be expensive.

Although some financial market and services firms are so dominant
that they cannot avoid the so-called SIFI designation, many on the
borderline would rather escape the new title since it brings with it the
need for costly risk management and in some cases, extra capital
buffers.

The firms are only the first to be so designated and the eventual
list will include the obvious and some not-so-obvious financial services
companies, whether they are banks or non-banks such as insurance
companies, hedge funds, asset management firms and up-to-now unregulated
money funds.

“As we approach the anniversary of the Dodd-Frank Wall Street
Reform and Consumer Protection Act this Saturday, it is worth
remembering why these reforms are so important,” FSOC Chairman Tim
Geithner said to his peers on the Council — which includes the head of
every financial market regulatory agency in Washington.

“If you need a reminder of why these reforms are important, then
take a moment to reflect on the number of people still out of work, at
risk of losing their home, or struggling to finance a growing small
business,” Geithner said. “And if those reminders are not enough,
consider the failures of MF Global and Peregrine Financial, the risk
management failures at JPMorgan, the abuses surrounding LIBOR, or the
financial threats from Europe. This work is not done.”

Geithner gave SEC Chairman Mary Schapiro a platform from which to
promote her recommendations for money market fund reforms, proposals
which have split the Commission. They are still vulnerable to “cascading
failures” and the Commission, she said, is studying the issue closely.

Both Geithner and Federal Reserve Chairman Ben Bernanke followed up
with their endorsements of her efforts to devise a rule imposing changes
on the funds to put out for comment.

The Council approved its annual report, the eight designations and
its recommendations for contingent capital buffers in both closed and
open sessions. Additional details are being withheld from publication by
the Treasury Department until 16:00 ET.

** MNI Washington Bureau: 202-371-2121 **

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