What is a 'Systemically Important Financial Institution – SIFI'

Any firm as designated by the U.S. Federal Reserve, whose collapse would pose a serious risk to the economy. Systematically important financial institutions became the target of legislation and regulatory reform by the Obama Administration, due to issues concerning their consolidated supervision and regulation, following the financial crisis of 2008.


Economic risks can arise from the banking sector, but also from other financial organizations such as investment banks and insurance firms. New regulations under the Dodd-Frank legislation, mandate that financial institutions that fit SIFI qualifications, will have to meet higher capital standards and develop contingency plans for potential future failures.

BREAKING DOWN 'Systemically Important Financial Institution – SIFI'

Supervision and regulations of systemically important financial institutions is intended to prevent firms from becoming "too big to fail" and to prevent any assumptions that the government will provide financial support, in the event the firms do run into financial trouble. Many institutions have actively lobbied against being identified as a SIFI, because of the additional and significant regulatory requirements that SIFI firms will endure.


Factors for determining if a firm is a SIFI include size, if it accounts for a certain percentage of the activities of assets, of a financial sector or market, as well as contagion, correlation, concentration and conditions/context.

RELATED TERMS
  1. Primary Regulator

    The state or federal regulatory agency that is the primary supervising ...
  2. Financial System

    A financial system can be defined at the global, regional or ...
  3. Dodd-Frank Wall Street Reform and ...

    A compendium of federal regulations, primarily affecting financial ...
  4. Assuming Institution

    A healthy financial institution that purchases the assets of ...
  5. Capital Requirement

    The standardized requirements in place for banks and other depository ...
  6. Assisted Merger

    The merger of two or more financial institutions undertaken with ...
Related Articles
  1. Investing

    General Electric Asks Fed to Remove SIFI Label (GE)

    Since the collapse of 2008, the GE Capital business has pressured GE's stock, forcing the company last year to start reducing the size of that business.
  2. Investing

    MetLife Too Big To Fail Designation "Capricious" (MET, GE)

    The U.S. District Court opinion releasing MetLife Inc. (MET) from its designation as a "systematically important financial institution" (Sifi​) was unsealed Thursday, providing detail on Judge ...
  3. Personal Finance

    Why GE Capital Challenged Its SiFi Classification (MET, GE)

    After Metlife Insurance Inc. (MET) won reprieve from its classification as a “Systemically Important Financial Institution” (or SiFi) company by a U.S. Court judge yesterday, General Electric ...
  4. Insights

    A Brief History of U.S. Banking Regulation

    From the establishment of the First Bank of the United States to Dodd-Frank, American banking regulation has followed the path of a swinging pendulum.
  5. Managing Wealth

    Is the Fed Trying to Minimize the Next Stock Market Crash?

    Find out why the Federal Reserve wants to retroactively alter qualified financial contracts between big banks and investment firms.
  6. Small Business

    5 Federal Reserve Reforms That Would Boost Transparency

    The U.S. Chamber of Commerce recently published specific directives for the Federal Reserve to become more transparent and accountable.
  7. Investing

    Will the Next Financial Crisis Come From Europe? (DB, CS)

    Discover why the European financial system might be in trouble, why the European Central Bank may turn to bailouts, and why that is probably a mistake.
  8. Insights

    What's Economic Capital?

    While regulatory and economic capital use some of the same measurements of risk to determine how much capital a firm should hold in reserve, economic capital uses more realistic measures.
  9. Trading

    Financial Regulators: Who They Are And What They Do

    Find out how these government agencies govern the financial markets.
  10. Insights

    Financial Regulations: Glass-Steagall to Dodd-Frank

    Here are some of the most important financial regulations that have been established.
RELATED FAQS
  1. What are key government regulations that affect investing in the banking sector?

    Discover how the global financial crisis of 2008 changed the face of banking in the United States and around the world by ... Read Answer >>
  2. What is the Dodd-Frank Act? How does it affect me?

    The Dodd-Frank Wall Street Reform and Consumer Protection Act is a massive piece of financial reform legislation passed by ... Read Answer >>
  3. What is the long-term outlook of the banking sector?

    Find out about the long-term outlook for the banking sector. It has significantly changed after legislation that passed in ... Read Answer >>
  4. What are the major categories of financial institutions and what are their primary ...

    Understand the various types of financial institutions that exist in today's economy, and learn the purpose each serves in ... Read Answer >>
  5. What impact does government regulation have on the financial services sector?

    Learn about how the financial services industry is affected by government regulation, and the different types of regulations ... Read Answer >>
  6. How are asset management firms regulated?

    Find out how the asset management industry is regulated and how those regulations fit within the broader scope of financial ... Read Answer >>
Hot Definitions
  1. Cover Letter

    A written document submitted with a job application explaining the applicant's credentials and interest in the open position. ...
  2. 403(b) Plan

    A retirement plan for certain employees of public schools, tax-exempt organizations and certain ministers. Generally, retirement ...
  3. Master Of Business Administration - MBA

    A graduate degree achieved at a university or college that provides theoretical and practical training to help graduates ...
  4. Liquidity Event

    An event that allows initial investors in a company to cash out some or all of their ownership shares and is considered an ...
  5. Job Market

    A market in which employers search for employees and employees search for jobs. The job market is not a physical place as ...
  6. Yuppie

    Yuppie is a slang term denoting the market segment of young urban professionals. A yuppie is often characterized by youth, ...
Trading Center