Minutes of the Financial Stability Oversight Council

November 3, 2023 

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, 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, 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) 

Adrienne Harris, Superintendent, New York State Department of Financial Services (non-voting 

member) 

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

Regulation (non-voting member) (via videoconference) 

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 (via videoconference)

Sandra Lee, Deputy Assistant Secretary for the Council 

Laurie Schaffer, Principal Deputy General Counsel 

Eric Froman, Assistant General Counsel (Banking and Finance) 

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

Nicholas Steele, Director of Analysis, Office of the Financial Stability Oversight Council

Board of Governors of the Federal Reserve System 

Michael Barr, Vice Chair for Supervision 

Andreas Lehnert, Director, Division of Financial Stability 

Federal Deposit Insurance Corporation 

Susan Baker, Corporate Expert, Division of Complex Institution Supervision and Resolution 
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2 

Securities and Exchange Commission 

Amanda Fischer, Chief of Staff

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, Deputy Director, Division of Housing Mission and Goals 

Comptroller of the Currency 

Jay Gallagher, 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 

Richard Crump, Financial Research Advisor, Macrofinance Studies 

Office of Financial Research

Sriram Rajan, Associate Director, Research and Analysis Center

Federal Insurance Office

Philip Goodman, Senior Insurance Regulatory Policy Analyst 

New York State Department of Financial Services

Karen Lawson, Executive Vice President for Policy and Supervision, Conference of State Bank 

Supervisors 

Rhode Island Department of Business Regulation 

Ethan Sonnichsen, Managing Director, National Association of Insurance Commissioners 

(NAIC) (via videoconference)

Maryland Office of the Attorney General, Securities Division

Vincente Martinez, General Counsel, North American Securities Administrators Association 

PRESENTERS:

Commercial Real Estate Market Developments 

• Hein Bogaard, Lead Economic Expert, Supervision Risk Analysis Division, OCC 
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3

• Robert DiChiara, Regional Manager, Division of Insurance and Research, FDIC

• Kelby Souhrada, Senior Lead Expert, Systemic Risk Identification Support, OCC

(available for questions) 

• Filip Zikes, Principal Economist, Division of Financial Stability, Federal Reserve

(available for questions)

Update on Inter-Agency Working Group on Treasury Market Surveillance 

• Joshua Frost, Assistant Secretary for Financial Markets, Treasury

Update on the 2023 Annual Report

• Paula Tkac, Executive Vice President and Research Director, Federal Reserve Bank of 

Atlanta

Analytic Framework for Financial Stability Risks and Interpretive Guidance on Nonbank 

Financial Company Determinations

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

Executive Session

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

approximately 1:00 P.M. The Chairperson began by outlining 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 commercial real estate market developments, (2) an 

update on the work of the Inter-Agency Working Group on Treasury Market Surveillance, (3) an 

update on the Council’s 2023 annual report, and (4) the Council’s analytic framework for 

financial stability risk identification, assessment, and response, and the Council’s final 

interpretive guidance on nonbank financial company determinations.

1. Commercial Real Estate Market Developments

The Chairperson introduced the first agenda item, an update on commercial real estate (CRE) 

market developments. She introduced Hein Bogaard, Lead Economic Expert in the Supervision 

Risk Analysis Division at the OCC, and Robert DiChiara, Regional Manager in the Division of 

Insurance and Research at the FDIC, for the update. 

Mr. Bogaard stated that the presentation was intended as a follow-up to the presentation at the 

June 2023 Council meeting, in which the Council discussed CRE with a focus on banks with 

high CRE concentrations. He said that the federal banking agencies had continued to collaborate 

to analyze potential tail risk scenarios. He stated that CRE capitalization rates had recently risen,

but not by as much as the increase in 10-year Treasury yields. He said that while CRE 

delinquency rates remained stable overall, they were up sharply for office properties, which 

constitute approximately one-third of CRE lending. He described the distribution of CRE 

lending sources, which includes banks, insurers, non-agency commercial mortgage-backed 

securities (CMBS), and real estate investment trusts (REITs). 
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4

Mr. Bogaard noted that staff had conducted scenario analyses, which imposed hypothetical 

losses on mortgages and CMBS holdings, to assess the sensitivity of insurance firms to losses in 

the CRE sector. He noted that most CMBS holdings of insurers are highly rated and likely 

would not experience losses in a downturn. He said that while losses overall were manageable in 

the scenario, some firms would experience more capital impact than others. He noted that larger 

insurers tend to be more concentrated in CRE than smaller insurers. 

Mr. Bogaard stated that equity prices of REITs had been trending down since last year. He noted 

that while office REITs are not more highly leveraged than other types of CRE, their net income 

metrics were deteriorating. He also said that CMBS issuance had slowed sharply this year and 

that spreads on CMBS had widened. He concluded by describing loss rates on CMBS based on 

various levels of decline in occupancy rates.

Mr. DiChiara stated that the FDIC, Federal, Reserve, and OCC had collaborated to evaluate a 

CRE tail risk scenario for the banking sector. He described potential capital levels after applying 

loss scenarios. He noted that the banking agencies had estimated possible effects on bank capital 

levels based on scenarios involving extreme CRE loss rates. He said that before the application 

of the tail risk scenarios, nearly all the banks were well capitalized. He said that application of 

the tail risk scenarios indicated that there would be a greater capital impact on banks with high 

CRE concentrations. He also noted that there were generally higher CRE concentrations among 

banks with total assets between $1 billion and $10 billion. 

Following the presentation, the Chairperson stated that CRE continued to warrant attention from 

the Council. She noted that in its June meeting, the Council had discussed how developments in 

CRE were impacting banks. Noting that CRE challenges arise partly due to changes in interest 

rates, she said that CRE can function as a transmission channel for risk and deserves ongoing 

consideration. She said that supervisors should seek to ensure that firms manage risks related to 

CRE and that the Council should continue to monitor bank and non-bank financial institutions 

with exposures to the CRE market.

Council members then had a discussion regarding the collaborative efforts of banking agencies 

to monitor potential CRE risks; the need to examine potential risks comprehensively; and smaller 

banks’ exposures to CRE.

2. Update on Inter-Agency Working Group on Treasury Market Surveillance 

The Chairperson then turned to the second agenda item, an update on the work of the InterAgency Working Group on Treasury Market Surveillance (IAWG) to strengthen Treasury 

market resilience. She introduced Joshua Frost, Assistant Secretary for Financial Markets at 

Treasury, for the update.

Mr. Frost stated that the IAWG, whose members are Treasury, the Federal Reserve, the Federal 

Reserve Bank of New York, the SEC, and the CFTC, had made important progress across a 

range of workstreams since he presented to the Council on this topic in December 2022. He said 

that, among other actions, Council member agencies had issued new rule proposals, finalized 

rules, and made progress on data, transparency, and analysis. He said that notable volatility had 
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occurred in the Treasury market during 2023, from sources including the stresses that occurred in 

March and the recent increases in long-term interest rates. He stated that although the Treasury 

market had not experienced the kind of stress that occurred in March 2020, the IAWG members 

had continued to advance efforts to enhance market resilience. He said that this work must 

remain a top priority, given the importance of the Treasury market for financing the government, 

implementing monetary policy, and facilitating the functioning of the financial system as a 

whole.

Mr. Frost stated that during the week of November 6, the IAWG planned to publish a staff report 

on the progress made since the previous staff report was issued in November 2022. He said that 

on November 16, the IAWG members would co-host the annual U.S. Treasury Market 

Conference, which he described as an important venue for the official sector and private sector to 

discuss the Treasury market. 

Mr. Frost stated that Treasury planned to implement a buyback program in 2024 to advance two 

principal objectives: providing liquidity support and making Treasury’s cash-management 

practices more effective. He said that buybacks can play an important role in helping to make 

the Treasury market more liquid and resilient, by providing a regular source of demand for lessliquid securities. He said that the buyback program would also help Treasury to better manage 

its cash balance and reduce the volatility of Treasury bill issuance. He stated that these buybacks 

were not intended to substantively shift the structure of outstanding debt or to ameliorate periods 

of acute market stress.

Mr. Frost then highlighted three developments in IAWG members’ efforts to improve the 

resilience of market intermediation. First, he said that the SEC had finalized rules to require 

certain broker-dealers engaged in proprietary trading of Treasury securities to register with the 

Financial Industry Regulatory Authority (FINRA). He said that these rules would improve

oversight of such firms, and also improve transparency for both the official sector and the public, 

because once the firms register, their transactions will be included in Trade Reporting and 

Compliance Engine (TRACE) data. Second, he stated that IAWG staff members had performed

an initial analysis on the market structure of the off-the-run Treasuries segment, and hoped to 

identify potential policy options to improve the resilience of intermediation in this area. He said 

that this work built on the work he highlighted to the Council in his presentation last December

regarding all-to-all trading, where one of the key findings was that all-to-all trading was more 

prevalent in the on-the-run segment than in the off-the-run segment. Third, he noted that the 

SEC had proposed expanding the definition of “dealer” to improve the oversight of important 

liquidity providers in the Treasury market, including principal trading firms.

Mr. Frost then addressed the progress made by IAWG members and other Council member

agencies in improving data quality and availability in several areas. First, he said that the OFR 

had published its findings from the pilot data collection of non-centrally cleared bilateral 

repurchase agreement (repo) transactions that he highlighted in his previous presentation to the 

Council. He stated that one of the key findings from the pilot was the prevalence of bilateral 

repo activity occurring at what appear to be zero haircuts. He said that in January 2023, the OFR 

proposed a rulemaking for a permanent data collection. He said that a permanent collection 

should further improve the official sector’s ability to monitor this sizable market segment and 
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assess market practices and associated risks. Next, he noted that the SEC had adopted several 

amendments to Form PF in May 2023, one requiring reporting by large hedge fund advisors that

experience certain potentially significant stress events, and another to gather information from 

private liquidity funds. He said that the SEC had adopted similar rules for money market mutual 

funds regarding repo activity, sales, and shareholder information. Finally, he noted that the SEC 

had recently adopted a rule to require reporting of securities lending activity to FINRA. He said 

that the SEC rule also requires FINRA to use that data to provide better public transparency 

about the securities lending market. He stated that given the focus across the official sector on 

understanding the risks associated with securities financing transactions, money market mutual 

funds, and hedge funds, these rules collectively would strengthen the information available to the 

official sector and, in certain areas, to the public.

Mr. Frost then discussed several enhancements related to TRACE. He said that FINRA had

taken steps to implement two of the technical enhancements to TRACE data collections for 

Treasury securities that he discussed in his December 2022 presentation to the Council. He said 

that in May, the timeframe to report Treasury transactions to TRACE was shortened from endof-day to one hour. He also noted that on November 6, a FINRA requirement to improve the 

granularity of timestamps would go into effect. He said that in February 2023, FINRA had 

improved the public transparency of the TRACE data for Treasury securities. He said that 

reporting had become more frequent and that additional information on prices and trade counts 

was added for on-the-run securities. He noted that because these improvements were completed 

ahead of the bank-related stress in March, the new reports helped the public understand the 

impact of those events on Treasury markets. He stated that Treasury and FINRA continued to 

work together to implement transaction-level data reporting for on-the-run nominal coupon

Treasury securities, with end-of-day dissemination and appropriate cap sizes. He noted that on 

November 2, FINRA had filed a rule proposal with the SEC to proceed with this dissemination.

Mr. Frost then addressed recent progress on central clearing and trading venues. He said that the 

SEC was evaluating comments on its rule proposal to expand central clearing in the Treasury 

market. He stated that the SEC and CFTC had approved rule changes to improve the operations 

of an existing cross-margining agreement, with changes expected to take effect in January. He 

also noted that the SEC continued to consider changes to rules for alternative trading systems

(ATSs). He said that the large electronic platforms that host approximately one fifth of the 

volume in the Treasury market continued to be exempt from the ATS rules, and he noted that the 

SEC was considering removing that exemption as well as making additional trading venues, such 

as request-for-quote platforms, subject to the rules. 

Addressing fund leverage and liquidity risk, Mr. Frost stated that the Council’s Hedge Fund 

Working Group had been using its risk-monitoring framework to track threats, facilitate 

communication, and provide updates to the Council. He said that the SEC had adopted rules 

related to liquidity risk for money market mutual funds designed to reduce the risk of investor 

runs and increase the liquid resources those funds hold to meet redemptions. He also noted that 

the Treasury Market Practices Group, which is sponsored by the Federal Reserve Bank of New 

York, had established a working group to study risk-management practices related to noncentrally cleared bilateral repo, which he anticipated would complement the OFR’s datacollection efforts previously discussed.
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Mr. Frost stated in conclusion that the IAWG staffs had made significant progress toward the 

goal of improving Treasury market resilience, although he noted that additional work remained. 

He said that following the public release of the IAWG staff progress report, these issues would 

be discussed at the U.S. Treasury Market Conference on November 16.

Following the presentation, the Chairperson said that the IAWG continued to make important 

contributions to the enhancement of Treasury market resilience. She said that the upcoming 

publication of a third IAWG staff report indicated that the group continued to focus on making 

difficult but necessary changes. She stressed the importance of the Treasury market and 

encouraged continued efforts to enhance its resilience.

Council members then had a discussion regarding agencies’ collaboration and rulemaking efforts 

on Treasury market resilience.

2. Update on the 2023 Annual Report

The Chairperson then introduced the next agenda item, an update on the Council’s 2023 annual 

report. She turned to Paula Tkac, Executive Vice President and Research Director at the Federal 

Reserve Bank of Atlanta, for the update.

Ms. Tkac stated that member agencies were collaborating in the drafting of the report. She 

described the proposed structure of the report and certain topics that may be addressed, as well as 

potential recommendations and the timeline for completing the report.

Council members then had a discussion regarding certain sectors and risks that may be addressed 

in the report.

3. Analytic Framework for Financial Stability Risks and Interpretive Guidance on Nonbank 

Financial Company Determinations

The Chairperson then introduced the next agenda item, the Council’s analytic framework for 

financial stability risk identification, assessment, and response, and the Council’s interpretive 

guidance on nonbank financial company determinations. She said that she believed the two 

documents would create a rigorous and transparent approach for the Council. 

Council members then had a discussion regarding the two documents and the Council’s approach 

to monitoring, assessing, and addressing potential risks to financial stability.

The Chairperson adjourned the executive session of the meeting at approximately 1:57 P.M.

Open Session

The Chairperson called the open session of the meeting of the Council to order at approximately 

2:04 P.M.

The Chairperson outlined the agenda for the open session, which included (1) a presentation on
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the Council’s analytic framework for financial stability risk identification, assessment, and 

response, and the Council’s final interpretive guidance on nonbank financial company 

determinations, followed by a vote on each document, and (2) a vote on the minutes of the 

Council’s meeting on September 22, 2023.

1. Analytic Framework for Financial Stability Risks and Interpretive Guidance on Nonbank 

Financial Company Determinations

The Chairperson introduced the first agenda item, a presentation and vote on the Council’s 

analytic framework for financial stability risk identification, assessment, and response, and the 

Council’s interpretive guidance on nonbank financial company determinations. The Chairperson 

began by addressing why she believed it is important for the Council to achieve greater public 

transparency and analytic rigor and how these two documents would help the Council do so. 

The Chairperson stated that financial stability is a public good. She said that the U.S. financial 

system enables people to make payments, build businesses, save, and manage risks. She said 

that to fulfill our needs, it has evolved to be complex, diverse, and interconnected. She said that 

Americans rely on it every day and it has succeeded in supporting American families and 

businesses, enabling wealth creation and economic growth over generations. She said that when 

it falters, Americans can experience financial crises that can devastate households and businesses 

for years afterwards. She said that this underscored the need for the Council. She said that 

Congress created the Council after the 2008 global financial crisis to identify and respond to 

risks to U.S. financial stability. She stated that to maintain the strength of the financial sector, 

the U.S. needs a nimble but robust structure to monitor and address the build-up of risks that 

could threaten the financial system. She said that in the lead-up to the global financial crisis, 

inadequate oversight led to reckless risk-taking. She said that when large, interconnected 

financial companies failed in 2007 and 2008, stress spread through the financial system and then 

to the real economy. She stated that the reforms implemented after that crisis substantially 

strengthened the financial system, and she noted that the banking system as a whole remains 

strong. She noted that recent stresses in some financial sectors arising from the onset of the 

COVID-19 pandemic and the sudden failures of some regional banks underscored the continuing 

need to remain vigilant to threats to ensure the resilience of the financial system and U.S. 

economic strength. She said that this is central to the purpose of the Council and that the 

Council’s votes on the documents in the meeting would enhance its ability to fulfill this critical 

mission. 

The Chairperson stated that the Council would first vote on the analytic framework for financial 

stability risks. She said that the framework would help the public better understand how the 

Council conducts its work and how it deploys its various statutory tools to respond to risks. She 

said that the Council was, for the first time, providing a clear explanation of how it monitors, 

evaluates, and responds to potential risks to U.S. financial stability, regardless of whether they 

arise from activities, individual firms, or other sources. She said that under the framework, the 

Council’s response to a particular risk to financial stability would depend on the nature of the 

risk. She stated that risks often emanate from widely conducted activities and can be effectively 

addressed through action by an existing regulator or interagency coordination. She said that, at

other times, risks are instead concentrated in one or more specific nonbank financial companies. 
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The Chairperson next addressed the Council’s interpretive guidance on nonbank financial 

company determinations. She stated that among the tools Congress gave the Council is the 

authority to designate a nonbank financial company for Federal Reserve supervision and 

prudential standards if the company’s material financial distress or activities could pose a threat 

to U.S. financial stability. She said that the guidance to be voted on in the meeting would help 

ensure that the Council is able to use this authority as needed. She said that the guidance

described in detail the procedural steps the Council would expect to undertake in its review of a 

nonbank financial company for potential designation. She stated that these steps involve 

rigorous analysis and transparency. She said that the guidance maintained strong procedural 

protections for companies under review, including significant Council engagement and 

communication, and provided them with opportunities to be heard. She said that the guidance 

also affirmed that the Council would engage extensively with a company’s primary financial 

regulator. She said that the guidance eliminated several prerequisites to designation introduced 

by the interpretive guidance issued by the Council in 2019 that were not contemplated by the 

Dodd-Frank Wall Street Reform and Consumer Protection Act (the Dodd-Frank Act) and were

based on a flawed view of how financial risks develop and spread. She said that designation is 

only one of the Council’s tools, and she noted that the guidance did not prioritize this tool over 

other approaches to addressing financial stability risks. She stated in conclusion that the 

Council, in voting to adopt the analytic framework and guidance, would increase the 

transparency of the Council’s work and establish a durable process for the Council’s use of its 

designation authority, strengthening the Council’s ability to promote a resilient financial system 

that supports all Americans. She then introduced Sandra Lee, Deputy Assistant Secretary for the 

Council at Treasury, for the presentation. 

Ms. Lee stated that she would present the analytic framework and the interpretive guidance for 

the Council’s consideration. She noted that the Council issued these proposals in April. She said 

that after the comment period closed, interagency staff carefully considered the wide range of 

public comments. She said that the two documents reflected that public input. 

Ms. Lee stated that the analytic framework provided a public description of how the Council 

identifies, assesses, and responds to potential risks to U.S. financial stability, whether they derive 

from widely conducted activities or from individual firms. She said that the Council had never 

before issued a framework describing how it broadly approaches risks to financial stability 

regardless of origin. She said that the framework focused on three components. First, she said 

that to identify risks, the Council, in consultation with financial regulators, monitors a broad 

range of financial market developments, entities, and activities. She stated that the framework 

listed examples of asset classes, sectors, and activities that the Council monitors. Second, she 

said that the Council works with existing financial regulators to evaluate potential risks and 

determine if they might warrant additional action. She said that these evaluations would be datadriven and fact-specific. She said that the analytic framework specified eight vulnerabilities that 

most commonly contribute to financial stability risks and the channels by which the 

vulnerabilities can increase risks to financial stability. She stated that this type of analysis can be 

applied regardless of whether the Council is considering risks from activities, particular firms, or 

other sources. Third, she said that the analytic framework underscored that the Council may 

undertake a variety of approaches to respond to identified risks. She said that in many cases, the 

Council works with financial regulators to seek the implementation of actions to reduce 
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identified financial stability risks. She stated that alternatively, the Council may issue 

recommendations to regulators or to Congress. She said that in other cases, the Council may use 

one of its designation authorities. She said that the analytic framework did not prioritize any of 

the Council’s tools over another. She said that instead, the Council’s actions depend on the 

nature of the identified risk. 

Ms. Lee stated that, based on public comments, the analytic framework included a number of 

changes from the April proposal. She said that first, the framework provided additional 

transparency regarding how the Council interprets the phrase “threat to financial stability.” She 

said that this term had not been defined in the proposal and that some commenters suggested that 

the public would benefit from a better understanding of the Council’s view. She said that the 

analytic framework therefore built on the description of financial stability that was included in 

the proposal. She stated that the analytic framework interpreted “threat to financial stability” to 

mean events or conditions that could substantially impair the financial system’s ability to support 

economic activity. Second, she said that in response to public commenters’ requests for 

additional detail on some of the vulnerabilities and transmission channels that were identified in 

the proposal, the framework included more information on these factors and more sample 

metrics that the Council may consider. Third, she said that based on public comments that 

requested an explanation of the interplay between the listed vulnerabilities and transmission

channels, the analytic framework specified vulnerabilities that may be particularly relevant for 

each transmission channel. She said that finally, some commenters highlighted the importance 

of the Council’s engagement with existing financial regulators. She stated that the Council had a 

long history of working closely with primary regulators, and that the framework included

additional emphasis on the Council’s extensive engagement with state and federal financial 

regulatory agencies. 

Ms. Lee then turned to the guidance on nonbank financial company determinations. She stated 

that the guidance was intended to establish a durable process for the designation of nonbank 

financial companies, restore the Council’s ability to address threats to financial stability that 

could be posed by specific entities, and provide enhanced transparency to the public and to 

financial companies. She noted that the Dodd-Frank Act establishes the standard for 

designations and the list of factors the Council must consider in any designation. She said that 

the Council’s guidance did not alter those statutory requirements. She said that under the DoddFrank Act, a nonbank financial company can be designated only if the Council determines that 

the company’s material financial distress or its activities could pose a threat to U.S. financial 

stability. She said that the guidance described the procedural steps the Council would take in 

reviewing a nonbank financial company for a potential designation. She stated that the process 

would involve substantial engagement with companies under review and their existing 

regulators.

Ms. Lee stated that under the guidance, the Council would expect to follow a two-stage process. 

She said that in stage 1 of the process, a company identified for review would be subject to 

preliminary analysis based primarily on information from public and regulatory agencies. She 

said that the company would be notified and allowed to submit information to the Council at 

least 60 days before the Council votes on whether to advance the company to stage 2. She said 

that if the Council determines a company should continue to be reviewed, staff representing the 
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Council would engage extensively with the company in stage 2. She said that stage 2 involves 

significant two-way communications with the company under review and its primary financial 

regulator. She stated that if the Council’s preliminary analysis had identified particular risks as a 

focus for evaluation, the company would be notified of those issues, enabling the company to 

understand and address the concerns. She said that at the conclusion of stage 2, the Council may 

make a proposed designation with a two-thirds supermajority vote of Council members. She 

said that after a proposed designation, the Council would issue a written analysis to the company 

and the company may request a hearing. She said that after any hearing, the Council may vote to 

make a final designation, which would require a separate two-thirds supermajority Council vote. 

She stated that for any designated company, the Council would publish the explanation of the 

basis for the designation and encourage the company or its regulators to take steps to mitigate the 

identified risks. She said that the Council would re-evaluate all designations at least annually 

and rescind a designation if the company no longer meets the statutory standards for designation.

Ms. Lee stated that the new guidance removed three prerequisites to the designation authority 

that were created by the guidance that the Council adopted in 2019. Specifically, she said the 

2019 guidance stated that the Council would defer to existing regulators before considering a 

company for potential designation, perform a cost-benefit analysis of any designation, and assess 

a company’s likelihood of material financial distress. She said that these steps are not legally 

required, are not useful or appropriate, and unduly hamper the Council’s ability to use its 

statutory authorities. She stated that by removing these unwarranted hurdles, the revised 

guidance restored the availability of the Council’s designation authority without prioritizing any 

one of the Council’s tools over another. She said that the Council’s expectation is that any

designation would be based on rigorous, transparent, and data-driven analysis. She said that the

framework and guidance would increase public transparency of the Council’s work, help to 

ensure a rigorous process for mitigating risks to the U.S. financial system, and strengthen the 

Council’s ability to identify, assess, and respond to potential risks to U.S. financial stability.

Following the presentation, the Chairperson invited other Council members to comment.

Jerome Powell, Chair of the Federal Reserve, expressed his support for the analytic framework 

and the interpretive guidance. He said that the documents strike an appropriate balance between 

the activities-based approach and preserving designation as one of the tools that is available to 

the Council. He said that the framework and guidance would provide important additional 

transparency regarding the Council’s views on financial stability and the tools that are available 

to the Council to address financial stability risks. 

Gary Gensler, Chair of the SEC, expressed his support for the two documents. He said that 

history includes a number of examples in which tremors in one corner of the financial system 

spilled into the broader economy. He said that such events negatively impact American workers, 

businesses, and families. He said that such risks can emanate from any part of the financial 

system, including both the banking and nonbank sectors. He discussed the failure in 1998 of the 

nonbank financial company Long-Term Capital Management, a highly leveraged hedge fund. 

He noted that the report issued by the President’s Working Group on Financial Markets 

following the failure of the firm highlighted the risk of excessive leverage, along with “the 
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12

possibility that problems at one financial institution could be transmitted to other institutions, and 

potentially pose risks to the financial system.”

Chair Gensler then discussed the creation of the Council and its authority to designate nonbank 

financial companies for Federal Reserve supervision and enhanced prudential standards. He 

stated that over the past decade, the nonbank sector had continued to grow, and he noted that by 

some measures, it exceeded the size of the commercial banking sector. He said that the guidance 

would help to reinvigorate the Council’s designation process in a manner consistent with the 

original intent of Congress. He said that issuing the documents would be an important step for 

the Council, but not the only necessary step. He stated that Council member agencies still have 

important roles within their respective authorities to enhance resiliency to the financial system. 

He discussed SEC rulemakings designed to address risks in money market mutual funds and to 

shorten the standard settlement cycle for certain securities transactions, and he noted additional 

work being undertaken by Treasury, the Federal Reserve, and the CFTC to enhance the 

resiliency of the Treasury market. He also noted proposals by the SEC and CFTC to improve 

data collection by amending Form PF. 

The Chairperson noted that the Council had reestablished its Hedge Fund Working Group and 

expressed support for the proposals to amend Form PF. 

Martin Gruenberg, Chairman of the FDIC, stated that in the aftermath of the 2008 global 

financial crisis, Congress gave regulators a variety of tools under the Dodd-Frank Act to respond 

to the potential systemic risks posed by nonbank financial companies. He said that these include 

the Council’s authority to instruct the OFR to collect information on nonbank financial 

companies; to designate nonbank financial companies for Federal Reserve supervision and

enhanced prudential standards; and to designate systemically important financial market utilities 

and payment, clearing, and settlement activities for additional risk-management standards. He 

stated that these authorities serve as a basis to begin to address the systemic risk concerns 

presented by nonbank financial companies, including the lack of transparency, prudential 

supervision, and controls on the use of leverage. He said that the Council had been consistently 

focused on the potential systemic risks posed by nonbank financial companies. He noted that the 

Council had issued a statement in February 2022 on nonbank financial intermediation; 

announced the reestablishment of its Hedge Fund Working Group; established a new Open-end 

Fund Working Group; and issued a statement encouraging the SEC’s efforts to reform money 

market mutual funds and strengthen short-term funding markets. 

Chairman Gruenberg stated that the Council’s 2022 annual report encouraged relevant federal 

and state regulators to continue coordinating closely to collect data, identify risks, and strengthen 

oversight of nonbank companies involved in the origination and servicing of residential 

mortgages. He noted that the Council revived its Nonbank Mortgage Servicing Task Force to 

consider potential regulatory responses to risks in that sector. He noted that in April 2023, the 

Council had published the analytic framework for public comment. He stated that the

framework described the approach the Council expects to take in identifying, assessing, and 

responding to certain potential risks to U.S. financial stability. He noted that the Council had 

also issued the proposed interpretive guidance on nonbank financial company designations. He 

said that the revised guidance would remove several constraints to Council designation, while 
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13

retaining a multi-stage, deliberative process with opportunities for engagement with firms. He 

noted that the Council had carefully reviewed public comments on the proposals. He expressed 

his support for the analytic framework and the guidance. He stated that the analytic framework 

would enhance the transparency of the Council’s process for considering financial stability risks, 

and he said that the interpretive guidance would restore the practical use of the designation 

authority. He said that these were critical steps to advance the ability of the Council to address

risks to U.S. financial stability that could arise from nonbank financial companies. He said that 

it is important that the Council be willing to utilize all of the tools at its disposal.

Michael Hsu, Acting Comptroller of the Currency, stated that he supported the adoption of the 

interpretive guidance and the analytic framework. He said that the Dodd-Frank Act provides the 

Council with a number of important tools for monitoring and mitigating risks to U.S. financial 

stability. He said that it is important that the Council has a structure in place to use these tools 

when warranted. He said that the interpretive guidance and the analytic framework help strike 

the right balance to facilitate this structure. He stated that this approach would restore the 

options available to the Council under the Dodd-Frank Act and enable the Council to more 

effectively detect and prevent threats to U.S. financial stability. 

Rohit Chopra, Director of the CFPB, noted that financial history is often cyclical. He stated that 

in the years following the 2008 financial crisis, the memories of regulators and policymakers had

faded. He said that the economic and psychological damage inflicted by a financial crisis lingers 

for many years. He stated that the CFPB still hears from individuals who continue to experience 

the financial traumas from 15 years ago. He said that Congress directed the Council to “promote 

market discipline by eliminating expectations on the part of shareholders, creditors, and 

counterparties of such companies, that the government will shield them from losses in the event 

of failure.” He said that under section 113 of the Dodd-Frank Act, the Council is tasked with 

designating financial companies that could pose a threat to U.S. financial stability. He stated that 

designated firms may be required to have higher capital requirements to absorb losses, more cash 

on hand to mitigate the impact of runs, and file living wills to demonstrate the firm can fail 

without extraordinary government assistance. He noted that the Council currently has no firms 

designated under this authority. He said that this had led to a perception among certain market 

participants that this authority is defunct. He said that the Council’s actions in the meeting 

would begin to change that perception. He said that he supported the goal of promoting market 

discipline by removing certain obstacles under the previous designation guidance that were not 

grounded in law. He stated that it would be important for the Council to engage in rigorous 

analysis of certain sectors of the financial system to identify financial institutions that may meet 

the criteria outlined in section 113 of the Dodd-Frank Act. He said that he supported the Council 

launching a durable process to evaluate nonbank financial companies whose material financial 

distress or activities could pose a threat to U.S. financial stability. He noted that the financial 

system is inherently fragile and contains risks. He concluded by stating that one of the Council’s 

goals should be that at some point in the future, none of its members have lived through a 

financial crisis. 

Rostin Behnam, Chairman of the CFTC, stated that the Council’s designation authority is one of 

the most critical authorities that Congress created in response to the 2008 financial crisis. He 

said that he supported the revised interpretive guidance and analytic framework. He said that if 
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14

these documents were approved, the Council should use its authority with care and with a clear 

awareness of its impacts. He said that the authority to designate nonbank financial companies 

for Federal Reserve supervision and prudential standards fills a regulatory gap. He stated that 

the Council should be specific in the event it exercises this tool. He said that, consistent with the 

debate and exchange of ideas on the two documents, the Council should undertake any potential 

designation based on a thorough analysis and review of available data. He said that Council 

members should work closely and collaboratively towards any potential designation. He 

expressed his support for the Council’s decision to reinvigorate its Financial Market Utilities and 

Payment, Clearing, and Settlement Activities Committee. Noting that the Dodd-Frank Act 

granted the Council the authority to designate financial market utilities as systemically 

important, he said he supported the use of this authority in appropriate circumstances, given the 

importance of these entities to the functioning of U.S. financial markets. He stated that he would 

collaborate with other Council members with the goal of prudently exercising these authorities in 

connection with nonbank financial companies and financial market utilities. 

Sandra Thompson, Director of the FHFA, noted that the Council was established by the DoddFrank Act to identify risks to U.S. financial stability, promote market discipline by eliminating 

expectations that firms are too big to fail, and respond to emerging threats to the stability of the 

U.S. financial system. She said that Congress empowered the Council with tools to fulfill these 

purposes. She stated that the interpretive guidance issued by the Council in 2019, however,

prioritized one approach and one tool over other options available to the Council, which she said 

potentially limited the Council’s ability to respond to emerging threats to the stability of the U.S. 

financial system. She said that the interpretive guidance and the analytic framework would make 

it more likely that the Council can access its available tools to address threats that may arise in 

the future. She expressed her appreciation for the public input the Council received on the 

proposals, and she said she was encouraged that the Council took this feedback into 

consideration to provide further clarity on the interpretation of a “threat to financial stability,” 

further emphasize the Council’s engagement with existing regulators, and expand on the 

transmission channel discussion. She stated that she does not believe that nonbank financial 

company designations should be a Council goal, but she noted that risks arising in the future may 

be best addressed through the Council designation authority. 

Todd Harper, Chairman of the NCUA, stated that the Council’s work this year to reconsider the 

analytic framework and the nonbank financial company designations process was much needed. 

He noted that the Dodd-Frank Act gave the Council a range of tools to address potential threats 

to U.S. financial stability, including the authority to designate a nonbank financial company for 

Federal Reserve supervision and enhanced prudential standards when circumstances warrant it. 

He said that the interpretive guidance issued by the Council in 2019 included a number of 

procedural hurdles that needlessly hampered the Council’s ability to consider and use this 

important tool. He said that the revised interpretive guidance and the analytic framework would

provide the Council with a more strategic, effective, and rigorous approach to the designation 

process, and he said it described in more clear and balanced terms how the Council would 

undertake a potential designation. He stated that the financial market stresses experienced earlier 

this year clearly demonstrated that problems in one financial institution can rapidly transmit 

stresses elsewhere. He said that the Council should be nimble and proactive in anticipating and 

mitigating those risks. He said that the Council should conduct regular and deliberative reviews
Draft as of December 13, 2023

15

of any entities that could pose a threat to U.S. financial stability. He said that the Council needs 

to have access to all available tools, including potential designations, to address financial 

stability risks. He stated that the Council will be best equipped to fulfill its statutory mandate of 

protecting the financial system from systemic risks if it is prepared to act when needed. He said 

that given that mandate, he supported the analytic framework and the interpretive guidance. 

Thomas Workman, the Council’s independent member with insurance expertise, stated that he 

would support the interpretive guidance and the analytic framework. He said that he also wanted 

to address the revised approach under which an activities-based approach would not be 

prioritized over the Council’s designation authority; the use of cost-benefit analysis in the 

designation process; and the importance of the Council continuing to work closely with state 

insurance regulators. He noted that the Council does not broadly prioritize one type of tool over 

another. He stated that, instead, the Council examines a risk and designs an appropriate

response. He noted that the analytic framework states that “[t]he actions the Council may take 

depend on the nature of the vulnerability.” He said that vulnerabilities, for example, originating 

from activities that may be widely conducted in a particular sector or market over which a 

regulator has adequate, existing authority may be addressed through an activity-based or 

industry-wide response. He stated that in contrast, in cases where the financial system relies on 

the ongoing financial activities of a small number of entities, such that the impairment of one of 

the entities could threaten financial stability, or where a particular financial company’s material 

financial distress or activities could pose a threat to U.S. financial stability, an entity-based 

designation may be appropriate. Regarding cost-benefit analysis, he said that, consistent with the 

logic of making all the tools available to plainly examine a risk and design a response, 

conducting a cost-benefit analysis can be an important tool in the analytical process prior to 

making a determination. He said that cost-benefit analysis is a tool that is well-recognized in 

federal and state statutory, regulatory, and case law, and is generally understood by the public as 

a way to make efficient use of government and private resources. He stated that, in light of the 

significant attention given cost-benefit analysis in the comments received, consideration should 

be given to having the Council deem the cost of designation to be an appropriate risk-related 

factor. He said that while it may be difficult to calculate the benefit of a designation in a given 

case, calculating the cost of a designation could provide valuable information about the cost that 

would be imposed on the designee. In conclusion, he stated that the insurance sector has a 

strong, sophisticated state regulatory system. He noted that the revised interpretive guidance 

preamble states that “[t]he Council appreciates the expertise and experience ... of primary 

financial regulators ... . Under the Final Guidance, the Council will maintain its previous 

commitment to engaging extensively with existing regulators.” He stated that he expects the 

NAIC would continue to engage with the Council in addressing potential risks to financial 

stability in the U.S. insurance sector. 

Elizabeth Dwyer, Superintendent of Financial Services for the Rhode Island Department of 

Business Regulation, stated that her remarks would be limited to the potential designation of 

insurance companies. She said that insurance companies are subject to a vigorous and 

coordinated state-based regulatory system. She noted that a decade ago, her predecessor on the

Council had objected to designating certain insurance companies for Federal Reserve supervision 

and prudential standards, and she said that she had seen no data or supervisory information in the 

interim that would cause her to disagree. She noted that since that time, state insurance 
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16

regulators had undertaken efforts to strengthen and modernize the supervisory framework 

applicable to insurers. She said that in every area that the Council had identified potential 

vulnerabilities in the broader financial system, state insurance regulators had responded to ensure 

those concerns do not take root in the insurance sector. She stated that state insurance regulators 

also recognized that insurers can be affiliated with other financial enterprises that could pose a 

threat to U.S. financial stability. She said that, as a result, it is appropriate to ensure that the 

Council has effective designation guidance to address such threats. She said that designations 

are a blunt instrument, and she encouraged the Council to leverage the primary regulators that 

have broad authority and extensive expertise, which she identified as the Council’s first and best 

line of defense against emerging threats to the stability of the U.S. financial system. 

Following the discussion, the Chairperson presented to the Council the following resolution 

approving the analytic framework for financial stability risk identification, assessment, and 

response:

WHEREAS, the Council’s duties under section 112 of the Dodd-Frank Wall Street Reform and 

Consumer Protection Act (Dodd-Frank Act) include monitoring the financial services 

marketplace in order to identify potential threats to U.S. financial stability; monitoring domestic 

and international financial regulatory proposals and developments, including insurance and 

accounting issues, and advising Congress and making recommendations in such areas that will 

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

facilitating information sharing and coordination among the Council member agencies and 

other federal and state agencies regarding domestic financial services policy development, 

rulemaking, examinations, reporting requirements, and enforcement actions; recommending to 

the member agencies general supervisory priorities and principles reflecting the outcome of 

discussions among the member agencies; identifying gaps in regulation that could pose risks to 

the financial stability of the United States; requiring supervision by the Board of Governors of 

the Federal Reserve System for nonbank financial companies that may pose risks to the financial 

stability of the United States in the event of their material financial distress or failure, or 

because of their activities pursuant to section 113 of the Dodd-Frank Act; and making 

recommendations to primary financial regulatory agencies to apply new or heightened standards 

and safeguards for financial activities or practices that could create or increase risks of 

significant liquidity, credit, or other problems spreading among bank holding companies, 

nonbank financial companies, and United States financial markets; and

WHEREAS, on April 21, 2023, the Council approved a proposed analytic framework (the 

Proposed Analytic Framework) that described the approach the Council would expect to take in 

identifying, assessing, and responding to certain potential risks to U.S. financial stability; and

WHEREAS, the staffs of Council members and their agencies have reviewed the public comments 

received in response to the Proposed Analytic Framework and, following such review, have 

prepared a final analytic framework (the Analytic Framework); and

WHEREAS, the staffs of the Council members and their agencies recommend that the Council 

approve and publish the Analytic Framework.
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17

NOW, THEREFORE, BE IT RESOLVED, that the Council hereby approves the Analytic 

Framework and authorizes the Chairperson, or her designee, to cause the Analytic Framework 

to be published in the Federal Register, in a form and manner acceptable to the Chairperson, or 

her designee, and to otherwise make it available to the public as the Chairperson, or her 

designee, deems appropriate.

BE IT FURTHER RESOLVED, that the Council hereby delegates authority to the Chairperson, 

or her designee, to make technical, nonsubstantive, or conforming changes to the text of the 

Analytic Framework to ensure that it can be published in the Federal Register, and to take such 

other actions and issue such other documents incident and related to the foregoing as the 

Chairperson, or her designee, deems necessary or appropriate to fulfill the Council’s objectives

in connection with its publication.

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

The Council approved the resolution by unanimous vote.

The Chairperson then presented to the Council the following resolution approving the final 

interpretive guidance regarding nonbank financial company determinations:

WHEREAS, the Council’s duties under section 112 of the Dodd-Frank Wall Street Reform and

Consumer Protection Act (the Dodd-Frank Act) include monitoring the financial services

marketplace in order to identify potential threats to U.S. financial stability; identifying gaps in

regulation that could pose risks to the financial stability of the United States; and requiring

supervision by the Board of Governors of the Federal Reserve System (the Federal Reserve) for

nonbank financial companies that may pose risks to the financial stability of the United States in

the event of their material financial distress or failure, or because of their activities, pursuant to

section 113 of the Dodd-Frank Act; and

WHEREAS, section 113 of the Dodd-Frank Act authorizes the Council to determine that a

nonbank financial company shall be supervised by the Federal Reserve and shall be subject to

prudential standards if the Council determines that material financial distress at the company, or

the nature, scope, size, scale, concentration, interconnectedness, or mix of the activities of the

company, could pose a threat to the financial stability of the United States; and

WHEREAS, on December 4, 2019, the Council approved interpretive guidance (the 2019

Interpretive Guidance) that described the approach the Council intended to take in prioritizing 

its work to identify and address potential risks to U.S. financial stability and in making

determinations regarding nonbank financial companies under section 113 of the Dodd-Frank

Act; and

WHEREAS, on April 21, 2023, the Council approved proposed interpretive guidance (the

Proposed Guidance) that would replace the 2019 Interpretive Guidance, and that described the

process the Council would take in determining whether to subject a nonbank financial company

to Federal Reserve supervision and prudential standards under section 113 of the Dodd-Frank

Act; and
Draft as of December 13, 2023

18

WHEREAS, the staffs of Council members and their agencies have reviewed the public comments 

received in response to the Proposed Guidance and, following such review, have prepared final 

interpretive guidance (the Final Guidance); and

WHEREAS, the staffs of the Council members and their agencies recommend that the Council

approve and publish the Final Guidance.

NOW, THEREFORE, BE IT RESOLVED, that the Council hereby approves the Final Guidance,

which supersedes and replaces the 2019 Interpretive Guidance, and authorizes the Chairperson,

or her designee, to cause the Final Guidance to be published in the Federal Register, in a form

and manner acceptable to the Chairperson, or her designee, and to otherwise make it available

to the public as the Chairperson, or her designee, deems appropriate.

BE IT FURTHER RESOLVED, that 2019 Interpretive Guidance is hereby rescinded.

BE IT FURTHER RESOLVED, that in accordance with sections 6(i) and 7(a) of the Rules of

Organization of the Council, the Council hereby delegates authority to the Deputies Committee

to take such actions as may be necessary or appropriate to implement the Final Guidance, 

except with respect to actions that are nondelegable under the Dodd-Frank Act, the Rules of

Organization of the Council, or the Final Guidance; provided, that before the Deputies

Committee votes on commencing Stage 1 with respect to a nonbank financial company under the

Final Guidance, the Deputies Committee shall provide at least seven days’ written notice to the

Council, and, consistent with section 3(e) of the Bylaws of the Deputies Committee, such vote

shall take effect 24 hours after the approval of such action by the Deputies Committee unless any

member of the Council requests full Council review of such action.

BE IT FURTHER RESOLVED, that the Council hereby delegates authority to the Chairperson,

or her designee, to make technical, nonsubstantive, or conforming changes to the text of the 

Final Guidance to ensure that it can be published in the Federal Register, and to take such other 

actions and issue such other documents incident and related to the foregoing as the Chairperson, 

or her designee, deems necessary or appropriate to fulfill the Council’s objectives in connection 

with its publication.

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

The Council approved the resolution by unanimous vote.

2. Resolution Approving the Minutes of the Meeting Held on September 22, 2023

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

attached hereto of the meeting held on September 22, 2023 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.

The Chairperson adjourned the meeting at approximately 2:49 P.M.