The first batch of “systemically important financial institution” designations is expected within a few months from the Financial Stability Oversight Council.
Some firms likely to be on the first list include GE Capital, Prudential, MetLife and AIG, but large money managers like BlackRock and Pacific Investment Management Co. “are in the conversation,” said Jaret Seiberg, managing director and financial services policy analyst of Guggenheim Securities' Washington Research Group, a political intelligence firm.
A final rule issued by the Federal Reserve Board on Wednesday defines the factors that the FSOC, which was created by the Dodd-Frank Wall Street Reform and Consumer Protection Act, will consider as it chooses the non-bank financial firms to be supervised by the Federal Reserve.
Financial companies with at least $50 billion in total assets will be considered in a three-stage process that includes input from other federal regulators. The 10 voting FSOC members will consider a firm's size, scale and interconnectedness of activities in determining whether it could pose a systemic risk.
“It has everything to do with how interconnected you are,” Mr. Seiberg said in an interview.
Once designated as systemically important, companies will have to report to the Federal Reserve, the FSOC, and the Federal Deposit Insurance Corp. on their credit exposure to other significant financial and bank holding companies.
While a designation could cause a negative market reaction initially, “the government saying you're important to customers is going to be seen as an endorsement,” Mr. Seiberg said.
PIMCO spokesman Michael Reid declined to comment, and calls to BlackRock public affairs directors Brian Beades and Lauren Post were not returned at press time.