FSOC Approves Proposals Focused on Countering Potential Risks to Stability

The Financial Stability Oversight Council (FSOC) of the U.S. Treasury announced two proposals to counter potential risks.

One proposal would provide greater transparency about how the Council identifies, assesses and addresses potential risks to financial stability, the FSOC said in a Friday (April 21) press release.

The other proposal describes new steps the Council would take in considering whether to designate a nonbank financial company for Federal Reserve supervision and enhanced prudential standards, according to the release.

Both were approved unanimously by Council votes to be issued for public comment, the release said.

“Today’s proposals are important to ensuring the Council has a rigorous approach to identify, assess and address risks to our financial system,” Secretary of the Treasury Janet L. Yellen said in the release. “The Council remains committed to public transparency regarding its work, and today’s proposals would make us better equipped to handle risks to the financial system, whether they come from activities or firms.”

The two proposals would ensure the Council can move decisively to address risks to financial stability; explain to the public how the Council identifies, evaluates and responds to those risks; and establish a designations process that ensures transparency and opportunities for the companies under review to be heard, according to the press release.

Before the vote on the proposals, Yellen told the Council that last month’s failures of two banks underscored the importance of the FSOC’s work on financial stability.

As PYMNTS reported Thursday (April 20), the collapse of Silicon Valley Bank created a fallout that regional lenders have not yet shaken off.

The bank’s over-a-weekend failure spurred a deposit flight from regional banks to the presumed safety of financial giants like J.P. Morgan and Bank of America that are presumed to be “too big to fail.”

“Last month’s events show us that our work is not yet done,” Yellen said in prepared remarks posted on the Treasury Department website. “The authority for emergency interventions is critical. But equally important is a supervisory and regulatory regime that can help prevent financial disruptions from starting and spreading in the first place. I believe that the votes we will take today advance that very mission.”