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Minutes of the Financial Stability Oversight Council Held February 4, 2015 PRESENT: Jacob J. Lew, Secretary of the Treasury and Chairperson of the Financial Stability Oversight Council (Council) Janet Yellen, Chair, Board of Governors of the Federal Reserve System (Federal Reserve) Martin J. Gruenberg, Chairperson, Federal Deposit Insurance Corporation (FDIC) Mary Jo White, Chair, Securities and Exchange Commission (SEC) Timothy Massad, Chairman, Commodity Futures Trading Commission (CFTC) Richard Cordray, Director, Consumer Financial Protection Bureau (CFPB) Melvin Watt, Director, Federal Housing Finance Agency (FHFA) Thomas J. Curry, Comptroller of the Currency, Office of the Comptroller of the Currency (OCC) Debbie Matz, Chairman, National Credit Union Administration (NCUA) Roy Woodall, Independent Member with Insurance Expertise Richard Berner, Director, Office of Financial Research (OFR), Department of the Treasury (nonvoting member) Michael McRaith, Director, Federal Insurance Office, Department of the Treasury (non-voting member) John P. Ducrest, Commissioner, Louisiana Office of Financial Institutions (non-voting member) Adam Hamm, Commissioner, North Dakota Insurance Department (non-voting member) David Massey, Deputy Securities Administrator, North Carolina Department of the Secretary of State, Securities Division (non-voting member) GUESTS: Department of the Treasury Sarah Bloom Raskin, Deputy Secretary of the Treasury Christopher J. Meade, General Counsel Patrick Pinschmidt, Deputy Assistant Secretary and Executive Director of the Council Board of Governors of the Federal Reserve System Nellie Liang, Director, Office of Financial Stability Policy and Research Federal Deposit Insurance Corporation Jason Cave, Special Advisor to the Chairman for Supervisory Matters Securities and Exchange Commission Lona Nallengara, Chief of Staff Commodity Futures Trading Commission Lawranne Stewart, Special Counsel 1 Consumer Financial Protection Bureau Steven Antonakes, Deputy Director Federal Housing Finance Agency Mario Ugoletti, Special Advisor to the Director Comptroller of the Currency Jennifer Kelly, Senior Deputy Comptroller for Bank Supervision Policy and Chief National Bank Examiner National Credit Union Administration John Worth, Chief Economist Office of the Independent Member with Insurance Expertise Chris Ledoux, Senior Advisor Office of Financial Research Patricia Mosser, Deputy Director for Research and Analysis Federal Insurance Office Steven Seitz, Acting Deputy Director (Financial Stability) Louisiana Office of Financial Institutions Margaret Liu, Senior Vice President, Conference of State Bank Supervisors North Dakota Insurance Department Mark Sagat, Counsel and Manager, Financial Policy and Legislation, National Association of Insurance Commissioners North Carolina Department of the Secretary of the State, Securities Division Christopher Staley, Counsel, North American Securities Administrators Association Executive Session The Chairperson called the executive session of the meeting of the Council to order at approximately 3:08 P.M. (EST). The meeting was conducted by telephone. The Chairperson outlined the meeting agenda, which had previously been distributed to the members together with copies of the resolutions and other materials. The agenda for the meeting included the following subjects: (1) extension of the comment period for the Council’s Federal Register notice seeking public comment on asset management products and activities; and (2) the Council’s process for considering nonbank financial companies for potential designation. 1. Extension of the Comment Period for the Council’s Federal Register Notice Seeking Public Comment on Asset Management Products and Activities The Chairperson noted that the Council had received numerous requests asking the Council to extend the public comment period for its Federal Register notice seeking comment on potential 2 risks to U.S. financial stability from asset management products and activities. The Council had voted to approve the notice at its meeting on December 18, 2014, and comments on the notice were required to be submitted by February 23, 2015. The Chairperson said he supported extending the comment period and asked whether there were any questions or concerns. Hearing none, he presented to the Council the following resolution regarding the extension of the comment period. “WHEREAS, the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “DFA”) established the Council to identify risks to the financial stability of the United States, promote market discipline, and respond to emerging threats to the stability of the U.S. financial system; and WHEREAS, over the past year the Council has been engaged in work to analyze risks associated with the asset management industry and whether any such risks could affect U.S. financial stability; and WHEREAS, the Council is evaluating industry-wide products and activities to assess potential risks associated with the asset management industry; and WHEREAS, certain areas of interest have been identified as warranting further review and analysis, particularly whether risks associated with liquidity and redemptions, leverage, operational functions, and resolution in the asset management industry could affect U.S. financial stability; and WHEREAS, on December 18, 2014, the Council approved the “Notice Seeking Comment on Asset Management Products and Activities” (the “Notice”) and the publication of the Notice in the Federal Register and on the Council’s website; WHEREAS, comments on the Notice were required to be submitted no later than February 23, 2015; and WHEREAS, to allow the public more time to review, consider, and comment on the Notice, the Council believes it is appropriate to extend the comment period for the Notice. NOW, THEREFORE, BE IT RESOLVED, that the Council hereby approves the extension of the comment period for the Notice until March 25, 2015, and authorizes the Chairperson, or his designee, to cause notice of such extension to be published in the Federal Register and on the Council’s website, in a form and manner acceptable to the Chairperson or his designee, and to otherwise make it available to the public as the Chairperson deems appropriate. BE IT FURTHER RESOLVED, that the Council hereby delegates authority to the Chairperson, or his designee, to take such other actions and issue such other documents incident and related to the foregoing as they may deem necessary or appropriate to fulfill the Council’s objectives in connection with the publication of the notice of the extension of the comment period for the Notice.” 3 The Chairperson asked for a motion to approve the resolution, which was made and seconded. The Council approved the resolution by unanimous vote. 2. Supplemental Procedures Relating to Nonbank Financial Company Determinations The Chairperson then introduced the next agenda item, supplemental procedures relating to the Council’s nonbank financial company designations process. The Chairperson noted that the Council heard a detailed presentation at its open meeting on January 21, 2015, on outreach to stakeholders regarding the nonbank designations process and the changes to that process proposed by staff. The Chairperson then noted that based on the Council’s discussion of this issue at its previous meeting, he proposed that the Council proceed to a vote on the supplemental procedures. After a discussion among members of the Council, the Chairperson presented to the Council the following resolution. “WHEREAS, section 113 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “DFA”) authorizes the Financial Stability Oversight Council (the “Council”) to determine that a nonbank financial company shall be supervised by the Board of Governors of the Federal Reserve System (the “Federal Reserve”) and shall be subject to enhanced prudential standards if the Council determines that material financial distress at the nonbank financial company, or the nature, scope, size, scale, concentration, interconnectedness, or mix of the activities of the nonbank financial company, could pose a threat to the financial stability of the United States; and WHEREAS, the Council issued a final rule and accompanying interpretive guidance (the “Rule and Guidance”), codified at 12 C.F.R. Part 1310, that describes the criteria and the processes and procedures by which the Council will determine that a nonbank financial company shall be supervised by the Federal Reserve and shall be subject to enhanced prudential standards under the DFA; and WHEREAS, the Rule and Guidance describes a three-stage process that the Council expects to use for evaluating a nonbank financial company prior to a Council vote on a proposed determination; and WHEREAS, the Council has received recommendations from a number of companies, trade associations, public interest organizations, and members of Congress and their staffs regarding the Council’s process relating to nonbank financial company determinations; WHEREAS, the Council has conducted a review of its practices related to the evaluation of nonbank financial companies under section 113 of the DFA; and WHEREAS, the staffs of the Council Members and their Agencies have prepared the attached “Supplemental Procedures Relating to Nonbank Financial Company Determinations” (the 4 “Supplemental Procedures”), which supplement the processes and procedures set forth in the Rule and Guidance; and WHEREAS, the staffs of the Council Members and their Agencies also have prepared the attached “Notice of Document Availability” (the “Notice”) to be published in the Federal Register regarding the publication of the Supplemental Procedures on the Council’s website; and WHEREAS, the Council’s evaluation of nonbank financial companies is supported by the Council’s Nonbank Financial Company Designations Committee (the “Nonbank Designations Committee”), which is overseen by the Council’s Deputies Committee; and WHEREAS, the Supplemental Procedures provide for the Deputies Committee to instruct the Nonbank Designations Committee to form an analytical team to commence an active review of a nonbank financial company in Stage 2 of the Council’s process for evaluating nonbank financial companies for potential determination; and WHEREAS, under the Supplemental Procedures, the Council will notify a nonbank financial company after the Deputies Committee instructs the Nonbank Designations Committee to form an analytical team to commence an active review of a company in Stage 2. NOW, THEREFORE, BE IT RESOLVED, that the Council hereby approves and adopts the Supplemental Procedures; BE IT FURTHER RESOLVED, that the Council hereby delegates authority to the Deputies Committee to instruct the Nonbank Designations Committee to form an analytical team to commence an active review of a nonbank financial company in Stage 2; BE IT FURTHER RESOLVED, that the Council hereby delegates authority to the Deputies Committee to notify a nonbank financial company that comes under active review in Stage 2, and to take such other actions as the Deputies Committee may deem necessary or appropriate for the purpose of evaluating nonbank financial companies in accordance with the Supplemental Procedures; BE IT FURTHER RESOLVED, that the Council hereby approves the Notice and authorizes the Chairperson, or his designee, to cause the Notice to be published in the Federal Register, in a form and manner acceptable to the Chairperson or his designee, and to otherwise make it available to the public as the Chairperson deems appropriate; and BE IT FURTHER RESOLVED, that the Council hereby delegates authority to the Chairperson, or his designee, to make technical, nonsubstantive, or conforming changes to the text of the Supplemental Procedures and to the Notice to ensure that the Council can issue and publish the Supplemental Procedures on the Council’s website and publish the Notice in the Federal Register, and to take such other actions and issue such other documents incident and related to 5 the foregoing as they deem necessary or appropriate to fulfill the Council’s objectives in connection with such publication.” The Chairperson asked for a motion to approve the resolution, which was made and seconded. The Council approved the resolution by unanimous vote. The Chairperson adjourned the meeting at approximately 3:22 P.M. (EST). 6