BankThink

The Financial Stability Oversight Council voted to designate eight financial-market utilities as "systemically important." They will will be subject to heightened risk management standards under Dodd-Frank.

From the Card Act to the CFPB to Durbin, new regulations succeed only in raising the prices or crimping availability of financial services. Memo to politicians: Google "unintended consequences."

Receiving Wide Coverage ...(Systemic) Risk Management: In its first annual report to Congress, the Financial Stability Oversight Council branded a handful of industry clearinghouses and utilities — such as CHIPS and the Depository Trust Co. — “systemically important.” Just as a reminder: “important” is not meant as a compliment here. It’s a euphemism for “too big to fail” (which in turn is really a misnomer for “too big to be allowed to fail”). As systemically important financial institutions, these organizations will now be subject to tighter regulation by the SEC and the CFTC, the Journal notes. (Allan Grody writes on BankThink this morning that the scarlet SIFI undermines the case for making the DTC the storehouse for Legal Entity Identifiers, a system of bar code-like numbers that will help global regulators monitor exposures throughout the financial system.) Also in its annual report, the FSOC identified the top threats to American financial stability, including the European crisis, the precarious U.S. fiscal situation, the continued housing slump, and cyber-attacks. Wall Street Journal, New York Times

You can't claim to be a victim of watchdogs and at the same time blame watchdogs for being dumb, inept and disorganized.

The supense is over: the CFPB flexed its enforcement muscle. Capital One's practices for marketing credit card add-on products was the subject of the agency's first enforcement order.

U.S. regulators led the world in developing Legal Entity Identifiers. Now that the G20 has embraced the idea, though, we need to get on the same page with other nations.

Should Davis Polk be designated at a "Sytemically Important Financial Illustrator," asks the Financial Times, in reference to a "gem" of a chart that the law firm created to track Dodd-Frank's progress at age 2.

Mete out fitting punishments and get it over with. There are much more urgent issues in front of us.

Firms may abandon prudent risk management practices such as hedging with derivatives to avoid the SIFI designation. Agencies should have to prepare the equivalent of an Environmental Impact Statement before slapping the SIFI stamp on a firm.

Breaking News This Morning ...Bank of America Swings to Profit: And beats analysts' second-quarter estimates. Wall Street Journal, New York Times, Press Release