FSOC

House Financial Services Committee Chair Rep. Patrick McHenry, R-N.C., pressed the Financial Stability Oversight Council on the resurrection of its ability to designate nonbanks as systemically important.

The Financial Stability Oversight Council is clearing the administrative road to designate nonbank firms and activities as systemically risky, but if it wants those designations to stick it needs the public on its side.

The banking industry and consumer advocates praised the Financial Stability Oversight Council's move to reinvigorate its authority to regulate nonbanks. But that effort is going to take time and is guaranteed to face political headwinds.

The Financial Stability Oversight Council proposed two measures that would enable the body to more easily designate nonbanks as systemically important, a move expected to revive Dodd-Frank era debates between Republicans and Democrats.

The Financial Stability Oversight Council issued a pair of proposals that would enhance transparency into how the council designated nonbank firms and activities as systemically risky and simplify its process for designations.

In a letter to Treasury Secretary Janet Yellen, Sen. Sherrod Brown, D-Ohio, said regulators should have supervisory authority over crypto activity.

The report from the Financial Stability Oversight Council on cryptocurrency also urges action to prevent regulatory arbitrage and for regulators to study direct access to markets by retail customers.

Critics of the council say it hasn’t been as effective as it could be, but Treasury’s Nellie Liang said in an interview that right now it is “in a good place.”

Regulators and the Biden administration are considering how to respond to the sharp growth in digital assets pegged to fiat currency. Their options include establishing rules like those for bank deposits and having the Federal Reserve issue a digital dollar that competes with private-sector stablecoins.

Members of the Financial Stability Oversight Council are trying to light a fire under banks to adopt an alternative to the foundational reference rate.

President Biden plans to direct his administration to develop a strategy on climate-related risks for public and private financial assets, according to a draft document seen by Bloomberg News.

The Financial Stability Oversight Council has struggled to find its footing since its creation in Dodd-Frank. The Treasury secretary has signaled a more aggressive role for the panel, including reviving its authority to target nonbank behemoths.

Treasury Secretary Janet Yellen conducted her first meeting as chair of the Financial Stability Oversight Council and set the stage for a potential recalibration of the panel's role after it was weakened in the Trump administration.

Treasury Secretary Janet Yellen said she prefers to have the Financial Stability Oversight Council flag hazardous activities by nonbanks rather than subject specific firms to heightened supervision.

Banks weren't involved in the trading frenzy, but some observers say the regulatory response should address risks to all financial institutions.

The economic fallout from COVID-19 has highlighted systemic concerns about commercial real estate exposure, business debt and short-term wholesale funding, the Financial Stability Oversight Council said in an annual report.

President-elect Joe Biden will likely have to contend with a Republican-controlled Senate. That could have important implications for his approach to financial services policy.

The oversight council’s statement on the FHFA’s proposed capital rule raises questions for market participants trying to anticipate a post-conservatorship secondary mortgage market.

The Financial Stability Oversight Council said the mortgage giants may need a bigger capital cushion than their regulator has proposed, but stopped short of designating them as “systemically important financial institutions.”

The council created by the Dodd-Frank Act to identify systemic risks launched a review of the market as part of an activities-based approach that shifts focus away from targeting individual firms.