US financial regulators move to ease scrutiny of non-banks

The US plans to make it less likely that any of the country’s big insurance companies will be deemed worthy of extra supervision because they are too big to fail, the latest move by the Trump administration to undo key parts of the regulatory controls put in place after the financial crash.

Steven Mnuchin, the Treasury secretary, announced on Wednesday that the Financial Stability Oversight Council was proposing to change the way regulators monitor non-bank financial companies. If the plans are enacted, officials will focus on risks across the financial sector rather than honing in on particular institutions.

The board of the FSOC, which includes the heads of most of the top US financial regulators, put the proposal out to public comment following an open meeting on Wednesday.

Mr Mnuchin said: “Today’s proposal would make significant improvements to how the council identifies, assesses, and responds to potential risks to US financial stability . . . These changes will help ensure that the council accomplishes its mission efficiently and effectively.”

The proposals come four months after the council voted to end the extra supervision of Prudential, the largest US insurer by assets, and the last insurer to remain on a list of non-bank financial companies which pose a systemic risk.

Under the plan, institutions would only be put on that list if regulation across the system as a whole was deemed inadequate to tackle the threat they pose, and if officials decided the costs of the extra supervision did not outweigh the potential benefits. The council also proposed dropping a quantitative test of the risks posed by non-bank financial companies altogether.

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