NU Online News Service, July 22, 11:55 a.m. EDT

WASHINGTON—The Financial Stability Oversight Council (FSOC) will soon issue new proposed guidance on the criteria it will use to determine which financial firms are systemically significant, the deputy Treasury secretary told Congress yesterday.

In testimony before the Senate Banking Committee, Neal Wolin said the proposed additional guidance that will be published by the FSOC for comment will include "specific metrics that will help provide clarity on the FSOC's evaluation of firms for potential designation."

The testimony was a progress report on implementation of the Dodd-Frank financial-services reform law.

"The designation process will employ the judgment of the council's members based on a comprehensive understanding of a firm's risks," Wolin says.

He "anticipates that this proposed guidance will be issued for public comment in the near future."

Wolin's comments came on the heels of a letter to the Treasury from Sen. Sherrod Brown, D-Ohio, and Sen. Pat Toomey, R-Pa., in which the lawmakers say they "remain concerned about the lack of clarity in the current rule proposed on SiFi [systemically important financial institution] designations. Specifically, it is important that the SiFi designation criteria involve clear benchmarks, so that firms have some ability to predict whether and when they will be deemed 'systemically important' in the eyes of the FSOC, as a SiFi designation will significantly affect any firm."

In other comments, Wolin says the FSOC will soon release its first annual report, which will detail the monitoring process aimed at preventing the failure of any firm which would constitute a systemic risk to the financial system.

He says the report will outline the activities of the FSOC, including any designations or recommendations made with respect to activities that could threaten financial stability. It will also detail significant financial-market and regulatory developments, including insurance and accounting regulations and standards.

Wolin also says the report will include, as required by statute, recommendations "to enhance the integrity, efficiency, competitiveness and stability of the United States financial markets; promote market discipline; and maintain investor confidence."

The Treasury is also making progress in establishing the Office of Financial Research, which is designed to provide data to the FSOC and Treasury on worldwide financial issues, Wolin says. The OFR should have a staff of 60 by fall.