WASHINGTON — In its second meeting, the Financial Stability Oversight Council issued a proposal Tuesday that would help identify which financial market utilities are systemically important.
The proposal asked 10 broad questions designed to target certain companies, focusing on the aggregate exposure of a utility to counterparties; its relationships with other market utilities or payment, clearing or settlement activities and the effect that its failure could have on the broader financial markets.
"The payments, clearing and settlement systems of our financial system and the role financial market utilities play in that system are critical to a well-functioning financial system," said Treasury Secretary Tim Geithner, chairman of the FSOC. "Posing higher, more consistent standards on financial market utilities is a centerpiece — a key piece of building a more resilient, more robust financial system. And one of the critical responsibilities of this council is to take one of the first steps toward that by designating systemically important financial market utilities."
The industry has 30 days to comment. Specifically, the council asked what quantitative and qualitative information it should measure before making a designation, how it should measure and assess aggregated transactions' monetary value and what role international considerations should play in designating a financial market utility.
Separately, Michael Barr, who announced Tuesday he would leave his post as the Treasury Department's assistant secretary for financial institutions on Dec. 3, gave an update on the administration's review, with 11 federal agencies, of the industry's servicing and foreclosure processes.
The foreclosure task force, he said, has focused on the process, loss-mitigation activities, origination putbacks, securitization trusts and disclosure requirements.
"First, we are working to bring clarity and certainty as quickly as we can, but reviews will take time," Barr said. "And second, the bulk of the examination work to date [that is] focused on the foreclosure process has found widespread and, in our judgment, inexcusable breakdown in the basic controls of the foreclosure process. These problems must be fixed."
Regulators are doing on-site examinations of the largest servicers. They expect to complete their on-site field reviews by yearend, Barr said.
