1

Minutes of the Financial Stability Oversight Council

March 2, 2017

PRESENT: 

Steven T. Mnuchin, Secretary of the Treasury and Chairperson of the Financial Stability 

Oversight Council (Council)

Janet Yellen, Chair, Board of Governors of the Federal Reserve System (Federal Reserve) 

Martin J. Gruenberg, Chairperson, Federal Deposit Insurance Corporation (FDIC) 

Michael S. Piwowar, Acting Chairman, Securities and Exchange Commission (SEC)

J. Christopher Giancarlo, Acting Chairman, Commodity Futures Trading Commission (CFTC) 

Richard Cordray, Director, Consumer Financial Protection Bureau (CFPB)

Melvin Watt, Director, Federal Housing Finance Agency (FHFA)

Thomas J. Curry, Comptroller of the Currency, Office of the Comptroller of the Currency (OCC)

J. Mark McWatters, Acting Chairman, National Credit Union Administration (NCUA)

S. Roy Woodall, Independent Member with Insurance Expertise 

Richard Berner, Director, Office of Financial Research (OFR), Department of the Treasury 

(non-voting member)

Ray Grace, Commissioner, North Carolina Office of the Commissioner of Banks (non-voting 

member) 

Peter Hartt, Director, Insurance Division, New Jersey Department of Banking & Insurance

(non-voting member)

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

Division (non-voting member)

GUESTS: 

Department of the Treasury (Treasury)

Andrew Baukol, Acting Deputy Secretary of the Treasury

Craig Phillips, Counselor to the Secretary

David Lebryk, Fiscal Assistant Secretary

Eric Froman, Principal Deputy Assistant General Counsel (Banking and Finance) and Executive 

Director of the Council

Board of Governors of the Federal Reserve System

Daniel Tarullo, Governor

Andreas Lehnert, Director, Division of Financial Stability

Federal Deposit Insurance Corporation

Arthur Murton, Director, Office of Complex Financial Institutions

Securities and Exchange Commission

Richard Grant, Co-Chief of Staff
2

Commodity Futures Trading Commission

Richard Danker, Special Advisor

Consumer Financial Protection Bureau

Ron Borzekowski, Assistant Director for Research

Federal Housing Finance Agency

Sandra Thompson, Deputy Director, Division of Housing Mission and Goals

Comptroller of the Currency

Grace Dailey, Senior Deputy Comptroller for Bank Supervision Policy and Chief National Bank 

Examiner

National Credit Union Administration

Ralph Monaco, Chief Economist

Office of the Independent Member with Insurance Expertise

Charles Klingman, Senior Policy Advisor

Federal Reserve Bank of New York

William Dudley, President and Chief Executive Officer (by telephone)

Office of Financial Research

Stacey Schreft, Deputy Director for Research and Analysis

Federal Insurance Office

Steven Seitz, Deputy Director (Financial Stability)

North Carolina Office of the Commissioner of Banks

Michael Stevens, Senior Vice President, Conference of State Bank Supervisors

New Jersey Department of Banking & Insurance

Mark Sagat, Assistant Director, Financial Policy and Legislation, National Association of 

Insurance Commissioners

Maryland Office of the Attorney General, Securities Division

Christopher Staley, Counsel, North American Securities Administrators Association

PRESENTERS:

Update on Market Developments

• Fabio Natalucci, Deputy Assistant Secretary for International Financial Stability and 

Regulation, Treasury

• Clay Berry, Deputy Assistant Secretary for Europe and Eurasia, Treasury

• John Fagan, Director, Markets Room, Treasury
3

2017 Annual Report

• Stephen Ledbetter, Director of Policy, Office of the Financial Stability Oversight 

Council, Treasury 

• John Driscoll, Economist, Federal Reserve

• Dan Fichtler, Policy Advisor, Office of the Financial Stability Oversight Council, 

Treasury (available for questions)

Update on Annual Reevaluation of Nonbank Financial Company Designation

• Stephen Ledbetter, Director of Policy, Office of the Financial Stability Oversight 

Council, Treasury 

• Satyam Khanna, Policy Advisor, Office of the Financial Stability Oversight Council, 

Treasury 

• Bruce Saul, Senior Insurance Regulatory Policy Analyst, Federal Insurance Office, 

Treasury

• Eric Froman, Principal Deputy Assistant General Counsel (Banking and Finance) and

Executive Director of the Council, Treasury (available for questions)

Executive Session

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

approximately 1:00 P.M. (EST).

He began by outlining the meeting agenda, which had previously been distributed to the 

members together with other materials. The agenda for the meeting included the following 

subjects: (1) an update on market developments; (2) the Council’s 2017 annual report; and (3) an 

update on the annual reevaluation of a nonbank financial company designation.

The Chairperson then stated that he strongly valued the Council as a forum for its members to 

meet and share information. He also noted that the President had signed an executive order in 

February on core principles for regulating the financial system, and that the executive order 

instructed the Treasury Secretary to consult with the heads of Council member agencies and 

report on a number of areas relating to financial regulation. He said that he would seek input 

from Council members and stakeholders as part of Treasury’s work on the executive order.

1. Update on Market Developments

The Chairperson then introduced the first agenda item, an update on market developments. He 

introduced Fabio Natalucci, Deputy Assistant Secretary for International Financial Stability and 

Regulation at Treasury; Clay Berry, Deputy Assistant Secretary for Europe and Eurasia at 

Treasury; and John Fagan, Director of the Markets Room at Treasury. 

Ms. Berry provided an update regarding economic and political developments in Europe. She 

described forecasts for euro-area growth and inflation, and highlighted weaknesses in the 

financial sector, particularly the banking sector. With respect to economic vulnerabilities, she 

noted that in some countries, debt loads and unemployment were high and fiscal policy remained 

tight. Regarding political risks, she noted that elections were upcoming in several countries, and 
4

that there was a high degree of uncertainty regarding the negotiations and timeline for the United 

Kingdom’s departure from the European Union (Brexit), which could cause market volatility. 

With respect to Greece, she described the current status of negotiations with the European Union 

and the International Monetary Fund. She noted that certain payments would be due by Greece 

in July 2017 to the European Central Bank and other creditors and that the situation merited 

monitoring, but that Greece did not present an immediate risk to financial markets. 

Mr. Natalucci then presented on developments with respect to the Italian banking sector, 

including recent capital-raising efforts. He described efforts of European and Italian authorities 

to address weaknesses in the sector. He stated that the sector appeared unlikely to pose a direct 

financial stability risk to the United States unless risks arose simultaneously through a number of 

contagion and spillover channels, for example related to Brexit or other European banks.

Mr. Fagan then described recent developments in European financial markets. He explained that 

market participants were engaging in proactive and tactical risk management with respect to 

French political developments but that there was no evidence of broader risk aversion. He noted 

that authorities were monitoring the potential effects that political developments, including 

elections, could have on markets. He then described recent trends in financial markets including 

bank stocks, corporate and sovereign yields, and foreign exchange rates.

The Chairperson noted that Treasury would continue to monitor these developments.

2. 2017 Annual Report

The Chairperson then introduced the next agenda item, the Council’s 2017 annual report, and 

introduced Stephen Ledbetter, Director of Policy in the Office of the Financial Stability 

Oversight Council at Treasury, and John Driscoll, Economist at the Federal Reserve. 

Mr. Ledbetter first provided an overview of the process for developing the Council’s annual 

report. He noted that the report includes a signed statement by Council members, 

recommendations, descriptions of financial and regulatory developments, and a discussion of 

potential emerging threats and vulnerabilities.

Mr. Driscoll then provided an update regarding staff’s progress in developing the report. He 

noted that the drafting of the report was a collaborative process among all of the Council 

members. He stated that the next steps in the process would be to seek further input from 

Council members and member agencies regarding the draft report. He also described certain 

topics that could be addressed in the report.

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

expected timeline for drafting the report.

3. Update on Annual Reevaluation of Nonbank Financial Company Designation

The Chairperson then introduced the next agenda item, an update on the annual reevaluation of a 

nonbank financial company that the Council had previously designated under section 113 of the
5

Dodd-Frank Wall Street Reform and Consumer Protection Act. The Chairperson introduced 

Stephen Ledbetter, Director of Policy in the Office of the Financial Stability Oversight Council 

at Treasury; Satyam Khanna, Policy Advisor in the Office of the Financial Stability Oversight 

Council at Treasury; and Bruce Saul, Senior Insurance Regulatory Policy Analyst in the Federal 

Insurance Office at Treasury. Mr. Ledbetter summarized the Council’s basis for its original 

designation of the company and explained the Council’s process for annually reevaluating each 

of its previous designations. He noted that as a part of the annual reevaluation process, the 

Council invites the company to submit information to the Council. He stated that the staff 

analysis of the company was ongoing and that staff would consult with the company’s 

regulators.

Mr. Saul then provided an overview of the company. He described the company’s business, 

assets, and liabilities. He also described recent developments at the company and the company’s 

written submission to the Council in connection with the Council’s annual reevaluation of the 

designation.

Mr. Khanna then described developments over time at the company with respect to the three 

transmission channels through which the Council assesses the potential for material financial 

distress at a nonbank financial company to pose a threat to financial stability. He described 

factors relating to the exposures of market participants to the company; the potential for forced 

asset liquidations by the company; and critical functions or services provided by the company. 

He also described developments related to the company’s resolvability and complexity. Mr. Saul 

then described the existing regulatory scrutiny of the company.

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

company’s written submission to the Council, the availability of the information necessary to 

evaluate the risks the company could pose, the scope of the Council’s review, and the company’s 

size and complexity. The Chairperson asked staff to continue their analysis of the company.

The Chairperson adjourned the meeting at approximately 2:15 P.M. (EST).