Regulators on Tuesday put a bit more flesh on a bare-bones plan to determine which market players other than banks, such as hedge funds, should be deemed systemic risks and face closer government scrutiny.
The Federal Reserve released a proposal on how the United States would pick out these "systemic" firms, including a two-year test to determine if a firm's predominant business is financial.
But the proposal leaves insurers and hedge funds guessing if they will fall under the stricter regulatory regime.
Under the Dodd-Frank financial reform law passed last year, the newly created US risk council has the power to create a list of firms that are so big and interconnected they could impact the stability of financial markets.
The Federal Reserve will police these firms and they could be dismantled by the government if they start to topple. The idea is that orderly liquidation would prevent chaos in financial markets such as occurred when Lehman Brothers went bankrupt in September
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