Which financial firms are crucial?  That is the question top regulators are seeking as they try to enact the central reforms in the Dodd-Frank Act. These reforms could face further delay after top regulators told a Senate committee today that they believed more clarity was needed on what factors determined whether a financial company was “systemically important.” That label would make a company subject to heightened government regulation.

A panel of officials from the Federal Reserve Board, the Treasury Department and the agencies overseeing banking and securities markets said that they would seek public comment on additional guidelines and gauges they are considering in deciding which companies will be included.

        January 2012 Deadline, Systemically Important Financial Institutions.   Regulators have unit January 2012 to put the heightened regulatory standards in place, but there has been some hope in the financial industry and Congress that decisions about what firms fall under the designation will come sooner. That would eliminate uncertainty over the breadth of the new rule’s embrace. Officials indicated that they hoped to release a package of proposed rules this summer.

The designation of systemically important financial institutions was included in the Dodd-Frank Act as a way of addressing the problem of companies being considered too big to fail. Companies deemed crucial to the stability of the broad financial system will be overseen by the Federal Reserve Board in addition to their usual regulators.

Bank holding companies with more than $50 billion in assets automatically fall under the designation. But it is expected that some insurance companies, hedge funds and other companies involved in financial and money markets might require an additional level of scrutiny to guard against threats to the banking system and financial markets.

Fed Chairman Ben Bernanke said that while he doubted regulators could “provide an exact mechanical formula that can be applied without judgment,” they could lay out objective criteria that they consider most important in making the designation.

Senator Patrick Toomey (R-PA) urged the regulators to leave their proposals on the subject open for public comment for at least 60 days, roughly double the comment period that regulators have been using for many of the rules being drawn up to carry out aspects of the Dodd-Frank Act.

While none of the regulators would commit to that, several said they supported the idea.  SEC Chairman Mary  Schapiro said a “robust comment period” would help to clear up much of the uncertainty around the “systemically important” designation.  [NYTimes, 5/12/11]