Systematically Important Financial Institutions (SIFIs)

[MachineGhost]

(No, the title is not from Anchorman 2, but it sure is damn funny that only the government can come up with stuff like that.)

In conclusion, I have tried today to sketch out the progress the FDIC has made since the enactment of the Dodd-Frank Act to develop the operational capability to carry out its new systemic resolution authorities and a resolution strategy that can credibly envision how a SIFI can be closed without putting the financial system itself at risk. As we carry forward this work, we believe it is important to be as transparent as possible so as to gain the benefit of the wisdom of others as well as to establish an understanding by financial markets and the public of what we are doing. For this reason we have been actively reaching out to the financial industry, academia, and the public interest community.

I would like to conclude by noting that developing a credible capacity to place a systemically important financial institution into an orderly resolution process is essential to subjecting these companies to meaningful market discipline. Without this capability, these institutions – which by definition pose a risk to the financial system – create an expectation of public support to avert failure. That distorts the financial marketplace, giving these institutions a competitive advantage that allows them to take on even greater risk and creating an unlevel playing field for other financial institutions that are not perceived as benefiting from potential public support. There is a very strong public interest in the FDIC developing the capability to carry out its new systemic resolution responsibilities in a credible and effective way.

http://www.fdic.gov/news/news/speeches/ ... y1012.html