prudential standards proposal for sifis be modified to adopt to the unique and distinct profile of nonbank sifis different businesses with different business models will require different regulatory standards. do you agree, and specifically, insurance companies are very different from banks. you know, private businesses are very different and mr. gibson, could you elaborate on that? >> so we understand that different types of nonbank financial companies will have different characteristics and different business models that may make it necessary or desirable for us to tailor the enhanced prudential standards and we have committed that we will do that when the companies are designated. in terms of the proposed rule that we put out for comment in december, the rule was out for comment. we received many, many comments, including from many nonbank financial companies that were worried about the possibility of being designated and we're currently in the process of weighing the comments. so i can't predict where the final rule will come out on that, but we have committed after the companies are designa

nonbank foreign ministers is saifis. how much interconnectedness makes a firm a sifi? could you elaborate in this area. >> again, in the multiple rounds of public comment that we received, there's a desire to led to development of a three-stage process. the first stage is based on publicly-val indicated data and easily cal kulable metrics, in order to provide greater clarity that the public, about the types of endits that the council is going to want to examine further. the council is very clear that it wants to look in stages two to three, on a first by firm basis. a specific framework for it to do so. interconnecteds in is will of the things that the council will be looking at. >> one of six broad categories of frameworks, the others are size, substitutability, leverage. >> how did you find interconnectedness? >> there's the council does not believe after much analysis. that there's a single metric or formula that can measure interconnectedness. the council believes rather than have a one size fits all interconnected in. it's one of the issues that when it looks at a

auer, so designated nonbank sifis, how much weight will the fsoc give to existing regulators? perhaps you have an international nonbank financial institution and in their home country they have supervisory authority that's very clear. would the fed be likely that the fed would be designated or less likely? >> both in the framework that the council lays out in its rule and guidance stages two and three, the council does plan to take into account existing regulatory scrutiny, whether that scrutiny is domestic or foreign, whether at the conso d consolidated level or legal entity level. that would all be factors that would lead into the council's ultimate determination about whether or not that firm poses a threat to financial stability. >> mr. fwibson, you said earlier that you have the authority, the fed has the authority to tailor standards as appropriate to nonfinancial companies. now, isn't this unchartered territory for the fed? >> we have the authority to tailor the standards for nonbank financial companies. commercial companies would not be subject to the nonbank. so there

really was done to provide clarity to the public sxwg companies about how fsocs will designate nonbanks as sifys. i understand that it has been estimated that about 50 entities will be considered for heightened regulation based on the size and scope of their financial activities. once designated, these companies will be subject to stricter standards under rules that the fed is currently developing and which it has asked for detailed input. so i look forward to hearing from the panels and i also look forward to hearing from the firms. i welcome our panelists today and yield back, and i also would like to ask unanimous consent for mr. green to have privileges as a subcommittee member today so he may question also. >> without objection. >> thank you. >> so ordered. >> i'd like to recognize chairman of the full committee mr. bacchus for three minutes for an opening statement. >> i thank the chairman. at today's hearing we'll have an opportunity to examine one of dodd-frank's most vague and potentially problematic mandates. we are here to better understand what it means to be systemically important a

role before it begins designating nonbank firms with sifis. >> what's interesting is while there's a lot of discussion of the process, there's also a discussion that they're looking at 50 different companies. we have a bank centric model. they should start to look at whether or not there are unique characteristics to look at. >> how optimistic are you that enhanced supervision of individual companies will reduce the likelihood of any future financial crisis? >> i'm not optimistic about that given the historical record. i think it's difficult to anticipate what's likely to happen and what the source of risks may be. in the near teerm, it's likely to be heightened scrutiny and reduction in the likelihood of excess risk taking. over time as merms tend to fade, i think it's likely we will be an environment where the risks will be very difficult to identify and control. >> would you agree that looking at individual companies is a systemic risk for us? >> i think it's preferable to troo to look at activities and you can look at companies involved in that those activities. looking at indivi