WASHINGTON — The Federal Reserve Board on Monday sought to clarify a chief requirement that, if met, would result in a nonbank financial company falling under the central bank's supervision.
The Fed, which supervises the largest banks in the U.S., has been working to develop requirements for assessing whether a company is "predominately engaged in financial activities" as called for under Dodd-Frank.
The Fed released its initial proposal in February 2011, but has chosen to amend its definition given roughly two dozen comment letters it received on its draft.
"Based on the comments received, the Board believes that clarification is needed regarding the scope of activities that would be considered to be financial activities under the proposal," according to the Fed's notice.
Under Dodd-Frank, a nonbank financial company can be designated as systemically important by an interagency group, known as the Financial Stability Oversight Council, which is headed by Treasury Secretary Tim Geithner, only if 85% or more of the firm's revenues or assets are related to activities that are financial in nature.
In its proposed change, the Fed said that certain activities, like lending, exchange or transferring money and securities, or providing financial or investment advisory services, will be considered financial in nature. The Fed included a list of those activities and plans to provide a more detailed discussion at a later date.
Comments on the change must be submitted by May 25.
The Fed's notice comes a day before regulators meet to vote on a final rule on supervision and regulation of nonbank firms. That effort is separate from the Fed's rulemaking process.