Washington, D.C. — The Financial Stability Oversight Council (FSOC), after reviewing comments on its April proposals, today voted unanimously to approve a new analytic framework for identifying, assessing, and addressing risks to the financial system and updated guidance for how it will determine which entities to designate for Federal Reserve supervision and enhanced prudential standards. The measures explicitly recognize that risks to the financial system today can come not just from certain kinds of activities but also from individual nonbank entities, and they remove unnecessary procedural hurdles to the FSOC’s ability to designate entities for special supervision. In response, Alexandra Thornton, senior director of financial regulation at the Center for American Progress, issued the following statement:
With today’s approvals, the FSOC has taken a major step forward in fulfilling the mission Congress assigned to it more than a decade ago in the Dodd-Frank Wall Street Reform and Consumer Protection Act. The FSOC’s actions today take heed of the lessons of the 2007–2008 financial crisis, when shadow banks originated subprime mortgages, packaged them into mortgage-backed securities, and distributed them throughout the financial system, contributing to an economic collapse in which U.S. households lost more than $17 trillion in net worth. Simply put, today’s measures reflect what Americans expect from financial regulators—protection of the financial system from emerging risks, regardless of where they originate.
Related resources:
For more information on this topic or to speak with an expert, please contact Sarah Nadeau at [email protected].