As important as the designation authority is to preclude the Lehmans or AIGs of the future, it is almost surely not the optimal regulatory approach for most activities that can be characterized as shadow banking or that are conducted by nonbank intermediaries so as to raise financial stability concerns.
The vast majority of firms engaged in such activities will not satisfy the statutory test for designation. In any case, it is unclear that all of the statutory prudential requirements for designated firms would be necessary or appropriate in dealing with the risks to financial stability posed by the activities of these firms.