Executive orders calling for a review of the Financial Stability Oversight Council and significant tax regulations issued in 2016 were signed Friday by President Donald Trump.
Scrutiny of FSOC is part of Mr. Trump's overall criticism of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, which created the council and its process for designating non-banks as systemically important financial institutions. So far, three financial institutions, Prudential Financial, MetLife, and AIG, have been designated as SIFIs, which subjects them to more Federal Reserve governance and higher capital requirements. MetLife successfully challenged that designation in court. General Electric was previously designated a SIFI as well, but the decision was rescinded after it sold its financing unit, GE Capital.
The FSOC order allows 180 days for reviewing the designation process, and designations will be put on hold until it is complete. Treasury Secretary Steven Mnuchin, who serves as FSOC chairman, said Friday “the most important part of FSOC is that I can bring the regulators together, get everybody in a room, be able to address important part(s) of regulation.”
Dennis Kelleher, president and CEO of the non-profit organization Better Markets, said in a statement that FSOC had bipartisan support when it was created, and that it is “a crucial and indispensable early warning system for America's financial system.”
Mr. Trump also signed a third order to review a Dodd-Frank provision addressing liquidation authority for failing banks.
The tax-related order directs Mr. Mnuchin to consider whether tax regulations issued last year are unnecessarily complex or exceed their statutory authority. Mr. Trump said the tax memo "is the first step toward tax simplification."
The order also calls for determining if the new rules present undue financial burdens on taxpayers. Mr. Mnuchin told international finance officials earlier in the week that the Trump administration is preparing a major tax reform proposal, as are Republican leaders in Congress.