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Berkshire Hathaway Could Face Systemic Risk Designation

The U.S. Financial Stability Oversight Council (FSOC) is reported to be carefully examining Warren Buffett’s Berkshire Hathaway Inc. to determine whether the conglomerate, based in Omaha, Nebraska, plays a role in the financial system that is sufficiently significant enough to require supervision by the Federal Reserve...
January 28, 2014

The U.S. Financial Stability Oversight Council (FSOC) is reported to be carefully examining Warren Buffett’s Berkshire Hathaway Inc. to determine whether the conglomerate, based in Omaha, Nebraska, plays a role in the financial system that is sufficiently significant enough to require supervision by the Federal Reserve. Inside sources tell Bloomberg that the study by the FSOC staff does not indicate that the panel will designate Berkshire Hathaway, which has the world’s fourth-largest reinsurance operation, as systemically important and that the final decision is not likely to be made soon.

The FSOC, led by Treasury Secretary Jacob Lew, is working to determine which nonbank financial companies would pose a threat to the financial system if they collapsed. The designation of systemically important would allow the Fed to impose stricter requirements on capital, leverage and liquidity and require the companies to conduct stress tests. Since the FSOC first met in October 2010, it has designated three nonbank financial firms as systemically important: American International Group Inc.; Prudential Financial Inc.; and the finance unit of General Electric Co. The council is in the final stage of its review of MetLife Inc., the nation’s largest life insurer.

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