U.S. TREASURY DEPARTMENT 

OFFICE OF PUBLIC AFFAIRS

FOR IMMEDIATE RELEASE: June 21, 2016

CONTACT: Treasury Public Affairs (202) 622-2960

FINANCIAL STABILITY OVERSIGHT COUNCIL RELEASES SIXTH ANNUAL 

REPORT

WASHINGTON – The Financial Stability Oversight Council (Council) today unanimously 

approved its 2016 annual report, which was developed collaboratively by the members of the 

Council and their agencies and staffs. The Council reports annually to Congress on a range of 

issues, including significant financial market and regulatory developments, potential emerging 

threats to the financial stability of the United States, and the activities of the Council. The report 

also makes recommendations to promote market discipline; maintain investor confidence; and 

enhance the integrity, efficiency, competitiveness, and stability of U.S. financial markets. 

“The Council’s annual report is a vital vehicle to publicly highlight potential threats to financial 

stability and is another example of how Wall Street Reform has improved coordination among 

financial regulators,” said Treasury Secretary Jacob J. Lew. “In this year’s annual report, the 

Council outlines potential threats on the horizon and offers an important roadmap to help guide 

the Council’s focus in the coming years. I look forward to continued collaboration with 

members of the Council as we carry forward this work.” 

The Council’s findings are organized around the following 12 themes that warrant continued 

attention and, in many cases, further action from the Council’s members or member agencies: 

• Cybersecurity: Government agencies and the private sector should continue to work to 

improve and enhance information sharing, baseline protections such as security controls 

and network monitoring, and response and recovery planning. 

• Risks Associated with Asset Management Products and Activities: The asset 

management industry’s increasing significance to financial markets and to the broader 

economy underscores the Council’s ongoing consideration of potential risks to U.S. 

financial stability from products and activities in this sector, including further analysis of 

the activities of hedge funds.
• Capital, Liquidity, and Resolution: Regulators should continue working to ensure that 

there is enough capital and liquidity at financial institutions to reduce systemic risk, 

including finalizing rules setting standards for the minimum levels of total loss-absorbing 

capacity and long-term debt maintained by certain large banking organizations operating 

in the United States.

• Central Counterparties (CCPs): Member agencies should continue to evaluate whether 

existing rules and standards for CCPs and their clearing members are sufficiently robust 

to mitigate potential threats to financial stability, and should also continue working with 

international standard-setting bodies to implement more granular guidance with respect to 

international risk management standards in order to enhance the safety and soundness of 

CCPs.

• Reforms of Wholesale Funding Markets: Counterparty risk exposure has been 

significantly reduced in the tri-party repurchase agreement, or repo, market, though the 

potential for fire sales of collateral by creditors of a defaulted broker-dealer remains an 

important risk. Better data are needed to assist policymakers’ understanding of how the 

aggregate repo market operates. Furthermore, regulators should continue to monitor and 

evaluate the effectiveness of structural reforms of money market mutual funds. 

• Reforms Relating to Reference Rates: Regulators and market participants should 

continue their efforts to develop alternative benchmark interest rates and implementation 

plans to achieve a smooth transition to these new rates. 

• Data Quality, Collection, and Sharing: While Council members have made progress in 

filling gaps in the scope, quality, and accessibility of data available to regulators, 

regulators and market participants should continue to work together to improve the scope, 

quality, and accessibility of financial data.

• Housing Finance Reform: While regulators and supervisors have taken great strides to 

work within the constraints of conservatorship to promote greater investment of private 

capital and improve operational efficiencies with lower costs, federal and state regulators 

are approaching the limits of their ability to enact wholesale reforms that are likely to 

foster a vibrant, resilient housing finance system. Housing finance reform legislation is 

needed to create a more sustainable system that enhances financial stability.

• Risk Management in an Environment of Low Interest Rates and Rising Asset Price 

Volatility: Depressed energy and metals commodities prices, large swings in equity 

valuations, and upward movement in high-yield debt spreads underscore the need for 

supervisors, regulators, and managers to remain vigilant in ensuring that firms and funds 

maintain robust risk management standards. 

• Changes in Financial Market Structure and Implications for Financial Stability:

The growing importance in certain markets of propriety trading firms and automated 

trading systems may introduce new vulnerabilities, including operational risks associated 

with the very high speed and volume of trading activity. Increased coordination among 

regulators is needed to evaluate and address these risks.

• Financial Innovation and Migration of Activities: Financial regulators will need to 

continue to be vigilant in monitoring new and rapidly growing financial products and 

business practices, even if those products and practices are relatively nascent and may not 

constitute a current risk to financial stability.
• Global Economic and Financial Developments: Market participants and regulators 

should be vigilant to potential foreign shocks that could disrupt financial stability in the 

United States. 

The annual report is available at fsoc.gov. 

In attendance at the Council meeting, in person or by phone, were: 

• Jacob J. Lew, Secretary of the Department of the Treasury (Chairperson of the Council) 

• Thomas Curry, Comptroller of the Currency 

• Richard Cordray, Director of the Consumer Financial Protection Bureau 

• Mary Jo White, Chair of the Securities and Exchange Commission

• Martin J. Gruenberg, Chairman of the Federal Deposit Insurance Corporation 

• Timothy G. Massad, Chairman of the Commodity Futures Trading Commission 

• Melvin L. Watt, Director of the Federal Housing Finance Agency

• Rick Metsger, Chairman of the National Credit Union Administration

• S. Roy Woodall, Jr., Independent Member with Insurance Expertise 

• Richard Berner, Director of the Office of Financial Research (non-voting member)

• Michael T. McRaith, Director of the Federal Insurance Office (non-voting member)

• Adam Hamm, Commissioner, North Dakota Insurance Department (non-voting 

member)

• John Ducrest, Commissioner, Louisiana Office of Financial Institutions (non-voting 

member)

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

Securities Division (non-voting member) 

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