Minutes of the Financial Stability Oversight Council

April 8, 2022 

PRESENT: 

Janet L. Yellen, Secretary of the Treasury and Chairperson of the Financial Stability Oversight 

Council (Council) 

Jerome H. Powell, Chair, Board of Governors of the Federal Reserve System (Federal Reserve)

Martin Gruenberg, Acting Chairman, Federal Deposit Insurance Corporation (FDIC) 

Gary Gensler, Chair, Securities and Exchange Commission (SEC) 

Rostin Behnam, Chairman, Commodity Futures Trading Commission (CFTC) 

Rohit Chopra, Director, Consumer Financial Protection Bureau (CFPB) 

Sandra L. Thompson, Acting Director, Federal Housing Finance Agency (FHFA) 

Michael J. Hsu, Acting Comptroller of the Currency, Office of the Comptroller of the Currency

(OCC)

Todd M. Harper, Chairman, National Credit Union Administration (NCUA) 

Thomas E. Workman, Independent Member with Insurance Expertise 

James Martin, Acting Director, Office of Financial Research (OFR), Department of the Treasury

(non-voting member) 

Steven Seitz, Director, Federal Insurance Office (FIO), Department of the Treasury (non-voting 

member) 

Charles G. Cooper, Commissioner, Texas Department of Banking (non-voting member) 

Elizabeth K. Dwyer, Superintendent of Financial Services, Rhode Island Department of Business 

Regulation (non-voting member) 

Melanie Lubin, Securities Commissioner, Maryland Office of the Attorney General, Securities 

Division (non-voting member) 

GUESTS: 

Department of the Treasury (Treasury)

Nellie Liang, Under Secretary for Domestic Finance

Sandra Lee, Deputy Assistant Secretary for the Council 

Eric Froman, Assistant General Counsel (Banking and Finance) 

Sean Hoskins, Acting Director of Policy, Office of the Financial Stability Oversight Council 

Board of Governors of the Federal Reserve System 

Andreas Lehnert, Director, Division of Financial Stability 

Federal Deposit Insurance Corporation 

Rae-Ann Miller, Associate Director, Risk Management Policy 

Securities and Exchange Commission

Amanda Fischer, Senior Counselor 
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Commodity Futures Trading Commission 

David Gillers, Chief of Staff 

Consumer Financial Protection Bureau

Gregg Gelzinis, Advisor to the Director 

Federal Housing Finance Agency 

Naa Awaa Tagoe, Acting Deputy Director, Division of Housing Mission and Goals 

Comptroller of the Currency 

Blake Paulson, Senior Deputy Comptroller for Supervision Risk and Analysis

National Credit Union Administration

Andrew Leventis, Chief Economist 

Office of the Independent Member with Insurance Expertise 

Charles Klingman, Senior Policy Advisor 

Federal Reserve Bank of New York

John Williams, President and Chief Executive Officer 

Richard Crump, Vice President, Capital Markets Function 

Office of Financial Research

Sriram Rajan, Associate Director, Research and Analysis Center 

Federal Insurance Office

Philip Goodman, Senior Insurance Regulatory Policy Analyst 

Texas Department of Banking 

Karen Lawson, Senior Vice President for Policy, Conference of State Bank Supervisors 

Rhode Island Department of Business Regulation 

Kay Noonan, General Counsel, National Association of Insurance Commissioners 

Maryland Office of the Attorney General, Securities Division 

Vincent Martinez, General Counsel, North American Securities Administrators Association 

PRESENTERS:

Digital Assets Update

• Sandra Lee, Deputy Assistant Secretary for the Council, Treasury 

• Jonathan Rose, Senior Economist, Federal Reserve Bank of Chicago 

Update on Financial Stability Developments

• William Bassett, Senior Associate Director, Division of Financial Stability, Federal 

Reserve 
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• Rahul Varma, Associate Director, Division of Market Oversight, CFTC 

• Richard Haynes, Deputy Director, Division of Clearing and Risk, CFTC

Executive Session

The Chairperson called the executive session of the meeting of the Council to order at 

approximately 10:00 A.M. The Council convened by videoconference. The Chairperson began 

by welcoming three new Council members: Martin Gruenberg, Acting Chairman of the FDIC; 

James Martin, Acting Director of the OFR; and Elizabeth Dwyer, Superintendent of Financial 

Services for the Rhode Island Department of Business Regulation. The Chairperson then 

outlined the meeting agenda, which had previously been distributed to the members together 

with other materials. The agenda for the executive session included (1) an update on digital 

assets, (2) votes on the minutes of the Council’s meetings on February 4, 2022 and February 28, 

2022, and (3) an update on financial stability developments. 

1. Update on Digital Assets 

The Chairperson turned to the first agenda item, an update on digital assets. She introduced 

Sandra Lee, Deputy Assistant Secretary for the Council at Treasury, and Jonathan Rose, Senior 

Economist at the Federal Reserve Bank of Chicago.

Ms. Lee began by noting that the Council identified digital assets as a Council priority at its

meeting on February 4, 2022. She stated that since that meeting, member agency staff had 

engaged closely and had begun preliminary work on the Council report being prepared in 

response to the Executive Order on Ensuring Responsible Development of Digital Assets, issued 

on March 9, 2022. She stated that staff would continue collaborating on the drafting of the 

Council report. 

Mr. Rose stated that the Executive Order called on the Council to produce a report outlining 

financial stability risks and regulatory gaps posed by various types of digital assets and providing 

recommendations to address those risks. He described preliminary interagency work by staff of 

member agencies related to the report, including the identification of potential risks posed by 

digital assets. He said staff would assess a variety of issues regarding digital assets and would 

seek to develop a common understanding of the potential risks to financial stability they could 

pose. Mr. Rose also described anticipated next steps in the process for developing the Council’s 

report under the Executive Order. 

Council members then had a discussion about member agencies’ work to assess potential 

financial stability risks posed by digital assets, including historical comparisons, interconnections 

with the banking system, and interagency coordination. 

2. Resolutions Approving the Minutes of the Meetings Held on February 4, 2022 and 

February 28, 2022 

BE IT RESOLVED, by the Financial Stability Oversight Council (the “Council”), that the 

minutes attached hereto of the meeting held on February 4, 2022 of the Council are hereby 
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approved. 

The Chairperson asked for a motion to approve the resolution, which was made and seconded. 

The Council approved the resolution by unanimous vote.

BE IT RESOLVED, by the Financial Stability Oversight Council (the “Council”), that the 

minutes attached hereto of the meeting held on February 28, 2022 of the Council are hereby 

approved. 

The Chairperson asked for a motion to approve the resolution, which was made and seconded. 

The Council approved the resolution by unanimous vote.

3. Update on Financial Stability Developments

The Chairperson turned to the next agenda item, an update on financial stability developments. 

She introduced William Bassett, Senior Associate Director of the Division of Financial Stability 

at the Federal Reserve, to discuss recent developments related to U.S. financial stability.

Mr. Bassett began by providing an overview of the Federal Reserve’s framework for assessing 

financial stability. He noted that it distinguishes between shocks, which are difficult to predict, 

and vulnerabilities, which are channels by which shocks can be amplified. He stated that the 

four key vulnerabilities in the framework are asset valuations and risk appetite; nonfinancial 

leverage; financial leverage; and maturity and liquidity transformation, also known as funding 

risk. 

Mr. Bassett noted that high asset valuations can increase vulnerabilities by making it easier for 

investors to take excessive risks. He also noted the volatility in equity prices and the increase in 

excess bond premium over the last year. 

With respect to commercial real estate, Mr. Bassett stated that property prices and rents were 

rising, with some sectors that were disproportionately affected by the pandemic, including office, 

hotel, and retail, remaining weak. He then turned to residential real estate, noting that house 

price valuations had risen substantially. He stated that most new mortgage debt was being added 

by borrowers with prime credit scores, unlike the early 2000s. He noted that the ratio of overall 

private nonfinancial-sector debt to income appeared to be in line with most of the past decade. 

He also noted that household balance sheets had improved and that delinquency rates remained

low even for lower-rated borrowers. He also stated that bank capital remained high. 

Mr. Bassett then addressed the leverage of other financial firms, stating that hedge fund leverage 

was likely above its pre-pandemic levels, although comprehensive and timely data was not 

available. He said that leverage among life insurance companies was near the highest levels in 

recent decades, but their risk-based capital ratio was not. He also described trends related to life 

insurance companies, mutual funds, and other nonbank financial institutions. 

Mr. Bassett concluded by stating that the appetite for risk remained ample; vulnerabilities 

associated with nonfinancial and financial leverage appeared to be moderate; underlying funding 
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market vulnerabilities appeared unchanged, although liquidity in some markets had been

strained; and economic strains arising from the Russian invasion of Ukraine could intensify.

The Chairperson then introduced Rahul Varma, Associate Director of the Division of Market 

Oversight at the CFTC, and Richard Haynes, Deputy Director of the Division of Clearing and 

Risk at the CFTC, to discuss commodity market developments.

Mr. Varma provided an overview of the impact on commodity markets of the Russian invasion 

of Ukraine. He noted that prices for key commodities, including oil and wheat, had been 

increasing before the invasion and rose sharply after the invasion. He stated that commodity 

prices, which had been hovering at approximately 20 percent over their pre-invasion levels, had 

recently moderated slightly, especially for oil, in part due to releases from the Strategic 

Petroleum Reserve. He stated that while premiums for upside risk protection had increased after 

the invasion, they had recently moderated somewhat. 

Mr. Varma stated that commodity markets, including for wheat and crude oil, were experiencing 

extreme volatility. He stated that agricultural markets faced a number of risks, including related 

to Ukrainian exports, fertilizer price increases, and the risk of weather events that could impact 

production.

Mr. Varma then addressed risk factors impacting energy and metals markets. He stated that 

prices in the U.S. domestic natural gas market had increased significantly since the Russian 

invasion of Ukraine. He also noted that Russia is the largest exporter of oil in the world. He also 

stated that Russia supplies approximately 40 percent of global palladium, and that prices had 

increased significantly since the invasion. He said that prices for other industrial metals, such as 

steel and aluminum, had also increased and stocks of these commodities had declined. He 

concluded by stating that options markets indicated that market volatility would likely remain 

elevated in the near term.

Council members then had a discussion about commodity price volatility in non-U.S. markets. 

Mr. Haynes then provided an update on cleared markets. He stated that aggregate margin at 

clearing members had increased since the beginning of 2022 to approximately $700 billion. He 

noted that the largest margin increases had occurred at clearinghouses that clear physical 

commodities, particularly energy and agricultural products. He said that aggregate margin levels 

had decreased somewhat from recent highs in late February and early March. He also discussed

increases in variation margin, which had recently peaked at approximately $50 billion, five times

prior average levels. He stated that although margin calls were elevated, all margin had been 

paid on time and in full. He said that the CFTC continued to engage with central counterparties

(CCPs) to monitor markets. 

Mr. Haynes stated that in 2020, margin increases had occurred across major asset classes, while 

in 2022 they were concentrated in exchange-traded derivatives, energy contracts, and related 

markets. He noted that margin levels are strongly influenced by market volatility. He also noted 

that margin as a percentage of contract value was high in 2022 for certain commodities, 

including Dutch natural gas, the ruble, and wheat. He also stated that while in 2020 there had 
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been a significant increase in initial margin at both U.S. and non-U.S. CCPs, in 2022 initial 

margin demand had shifted more to non-U.S. CCPs. He concluded by noting that non-bankaffiliated clearing members, which often clear commodities, had seen significant increases in 

margin over the preceding months.

Members of the Council then asked questions and had a discussion, including regarding financial 

exposures to Russia and hedge fund leverage. 

The Chairperson adjourned the meeting at approximately 11:02 A.M.