Systemic Risk Regulation of Systemically Important Financial Institutions


The collapse or near-collapse of several large financial firms in 2008 was one of the precipitating factors of the great recession that led the U.S. government and federal policymakers to focus on regulation of systemic risk and addressing "too-big-to-fail" concerns (the risk that a firm's failure could trigger widespread disruption and chaos in the domestic and global financial markets). The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (Dodd-Frank Act or Dodd-Frank) effected sweeping changes designed to address systemic risk by, among other things, increasing regulation and supervision of large financial firms and enhancing accountability and transparency in the financial system. These firms, known as Systemically Important Financial Institutions (SIFIs), are subjected to supervision and examination by the Federal Reserve, which is required to impose enhanced prudential standards on SIFIs.