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3/19/2020

Financial Stability Oversight Council Proposes Changes To Nonbank Designations Guidance | U.S. Department of the Treasury

Financial Stability Oversight Council Proposes Changes To
Nonbank Designations Guidance
March 6, 2019

The Financial Stability Oversight Council (Council) today voted unanimously to issue for public
comment proposed interpretive guidance regarding nonbank financial company designations.
The proposed guidance would implement an activities-based approach to identifying and
addressing potential risks to financial stability. It would also enhance the analytical rigor and
transparency of the Council’s process for designating nonbank financial companies.
“Today’s proposal would make significant improvements to how the Council identifies,
assesses, and responds to potential risks to U.S. financial stability,” said Treasury Secretary
Steven T. Mnuchin. “The result of significant collaboration among Council members, these
changes will help ensure that the Council accomplishes its mission e iciently and e ectively.”
Under the proposed guidance, the Council would:

Prioritize its e orts to identify, assess, and address potential risks to U.S. financial stability
through an activities-based approach. Under the proposal, the Council would monitor
diverse financial markets and market developments in consultation with relevant financial
regulatory agencies. In the event a potential risk to U.S. financial stability is identified, the
Council would leverage the expertise of existing regulators in pursuing the implementation
of actions to address the risk.

Perform a cost-benefit analysis before designating any nonbank financial company. The
Council would consider the benefits and costs of a designation for the U.S. financial system
and the relevant company. The Council would designate a nonbank financial company only
if the expected benefits justify the expected costs of the designation.

Assess the likelihood of a nonbank financial company’s material financial distress when
evaluating the firm for a potential designation. Before designating a nonbank financial
company, the Council would consider not only the impact of an identifiable risk, but also
the likelihood that the risk will be realized. Doing so will ensure that the Council remains
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3/19/2020

Financial Stability Oversight Council Proposes Changes To Nonbank Designations Guidance | U.S. Department of the Treasury

focused on those risks that are most likely to pose a threat to U.S. financial stability.

Create a more e icient and e ective nonbank financial company designation process. The
proposed guidance would create a more e icient and e ective designation process by
condensing the current three-stage process into two stages, increasing engagement and
transparency to firms and their regulators, and creating o -ramps that allow firms to
understand and address potential risks to financial stability.
The proposed interpretive guidance

will be open for a 60-day public comment period

a er it is published in the Federal Register.
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