House Financial Services Subcommittee on Housing and Insurance Hearing
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Thank you, Chairman Neugebauer, Ranking Member Capuano, and members of the Subcommittee for inviting me to appear before you today.
Next month will mark the third anniversary of the enactment of the Dodd-Frank Wall Street Reform and Consumer Protection Act ("Dodd-Frank"). In September, I will complete the second year of my six-year term as a voting member of the
As provided in Dodd-Frank, I serve as "an independent member appointed by the President, by and with the advice and consent of the
Section 112 of Dodd-Frank lists among the Council's duties the monitoring of domestic and international financial regulatory proposals and developments, including insurance and accounting issues, as well as advising
In terms of fulfilling my duties as a member of the Council, I monitor developments at the Financial Stability Board ("FSB"), based on information shared by Treasury through its
I also endeavor to monitor the work and proposals under consideration by the
To date, the Council has not made recommendations to
Section 175 of Dodd-Frank provides that the Chairperson of the Council, in consultation with the other members of the Council, shall regularly consult with the financial regulatory entities and other appropriate organizations of foreign governments or international organizations on matters relating to systemic risk to the international financial system.
The Secretary of the Treasury and my Council colleagues in exercising their broader responsibilities as heads of their respective agencies, regularly consult with their foreign counterparts, including regulators and other officials regarding systemic risk. Both the Dodd-Frank Act itself and the Council's Final Rule and Guidance setting forth the Council's process for considering nonbank financial companies for potential supervision by the Federal Reserve ("Guidance"), provide for consultation with foreign regulators. In my role as a Council member, to date I personally have met with officials from
In looking for ways to better align, coordinate, and complement the work of the Council and international efforts currently underway, there are two approaches worthy of consideration in order to better achieve the goals set out by
The IAIS is a membership organization for insurance regulators and supervisors from some 200 jurisdictions. The IAIS's objectives, as set forth in its bylaws, are "to promote effective and globally consistent insurance supervision in order to develop and maintain fair, safe, and stable insurance markets for the benefit of policyholders, and to contribute to global financial stability."
The IAIS has both "Members" and "Observers." Observers, who are generally insurers and their trade associations, pay dues; do not have a vote; and are allowed to attend some, but not all meetings of the IAIS and its committees. Many meetings are "members-only" and exclude Observers.
Currently, there are four Member classes:
1. An insurance industry supervisor who exercises its function within its jurisdiction;
2. the NAIC;
3. the FIO; and
4. an international organization made up of governments or statutory bodies that the Executive Committee may recommend to be eligible for membership for the purpose of furthering the objectives of the Association.
U.S. state insurance regulators are Members under the "insurance industry supervisor" criteria. The NAIC organization, the founding member of the IAIS, is itself a Member. Treasury's FIO, even though it is not a supervisor or regulator, was authorized by Dodd-Frank to represent
While the IAIS consists primarily of insurance supervisors and regulators, membership is also open to "international organizations," and the
Seeking a way to improve communication and coordination with members of the Council, the IAIS's Financial Stability Committee approved and forwarded a proposed IAIS bylaw amendment to the IAIS's Executive Committee in October of 2012. The amendment proposed to add a new IAIS membership class that, if established, would allow me and other Council Members to attend closed IAIS members-only meetings as non-voting Members. The IAIS's Financial Stability Committee is the primary IAIS forum where systemic risk issues are discussed among international insurance regulators and supervisors. Among such issues are the IAIS's on-going efforts, at the request of the FSB and in furtherance of the financial regulatory reform agenda of the
The proposed IAIS bylaw amendment would:
* allow (but not require) voting Council Members and their representatives to attend closed IAIS members-only financial stability meetings;
* enable me and other voting Council Members, and thereby in turn the Council itself, to more effectively fulfill the Council's statutory responsibilities to monitor international insurance developments, advise
* lead to more support for the U.S. representative at the IAIS. Council Member attendance at closed IAIS meetings would lead to more informed constituent input to the U.S. representative, and a greater ability to reflect the views of independent agencies and their actions that serve to promote financial stability.
The proposed IAIS bylaw amendment does not seek to supplant FIO's statutory role as part of Treasury in representing the U.S., as appropriate, at the IAIS - nor is it my desire to do so. The new non-voting membership category is solely intended to allow me and other Council Members to participate as non-voting members at closed IAIS members-only meetings, similar to the role the FIO plays as a non-voting member of the Council.
It is my understanding that the IAIS's Executive Committee will meet again in October of this year, and that the proposed IAIS bylaw amendment may well come up for further discussion. I support the efforts underway at the IAIS that would permit the Council and its members to attend IAIS members-only meetings and monitor important IAIS developments, and in particular, those related to global and U.S. financial stability.
(2) Financial Stability Board
In response to 2008 financial crisis, the G-20 established the FSB in
One of the FSB's tasks, as set forth in its Charter, is to "assess vulnerabilities affecting the global financial system and identify and review on a timely and ongoing basis the regulatory, supervisory and related actions needed to address them." Another task is to "promote coordination and information exchange among authorities responsible for financial stability."
According to its 2009 Charter, FSB membership is available to "national and regional authorities responsible for maintaining financial stability, such as ministries of finance, central banks, supervisory and regulatory authorities." Current FSB members from the U.S. are Treasury, the
As noted, the adoption of the FSB's Charter and its inaugural membership predated the establishment of the Council, its statutory purposes, duties and authorities, all of which principally relate to financial stability matters. However, to date, the Council is not itself a member of the FSB.
G-SIIs and SIFIs
Lastly, while there are many important international insurance regulatory developments underway, I do wish to share with this Subcommittee my perspectives on one area capturing recent headlines.
Last week, the Council voted to make proposed determinations regarding an initial set of nonbank financial companies under section 113 of Dodd-Frank. A company subject to a proposed determination has 30 days to request a hearing. After any hearing (or if one is not requested or waived) the Council may make a final decision regarding the designation of a nonbank financial company. As noted in its Guidance, the Council does not intend to announce publicly the name of any nonbank financial company that is under evaluation before a final determination is made. Accordingly, I cannot testify today concerning any specific company. However, I would like to mention my personal perspective as to how any designation of a G-SII by the FSB might relate to the Council's process.
The Council has demonstrated that it will proceed with its responsibilities in considering nonbank financial companies under section 113 of Dodd-Frank, even as international efforts might follow a different time line.
I appreciate the efforts of the Chairman and Members of this Subcommittee in evaluating the many important international issues associated with the supervision and regulation of insurance companies, both from prudential and systemic risk perspectives. I look forward to continuing to work with
Read this original document at: http://financialservices.house.gov/UploadedFiles/HHRG-113-BA04-WState-RWoodall-20130613.pdf
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