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Minutes of the Financial Stability Oversight Council

February 21, 2018 

PRESENT: 

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

Oversight Council (Council) 

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

Reserve) 

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

Jay Clayton, Chairman, Securities and Exchange Commission (SEC) 

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

telephone) 

J. Michael Mulvaney, Acting Director, Consumer Financial Protection Bureau (CFPB) (by 

telephone) 

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

Joseph Otting, Comptroller of the Currency, Office of the Comptroller of the Currency (OCC)

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

S. Roy Woodall, Independent Member with Insurance Expertise 

Ken Phelan, Acting 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)

Craig Phillips, Counselor to the Secretary 

Brent McIntosh, General Counsel

Brian Callanan, Deputy General Counsel

Bimal Patel, Deputy Assistant Secretary for the Council

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

Director of the Council 

Stephen Ledbetter, 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 

Jason Cave, Special Advisor to the Chairman for Supervisory Matters 
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Securities and Exchange Commission

Michael Piwowar, Commissioner 

Jaime Klima, Chief Counsel

Commodity Futures Trading Commission

Richard Danker, Special Advisor 

Consumer Financial Protection Bureau 

Brian Johnson, Senior Advisor to the Acting Director 

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

Diane Fraser, Senior Policy Advisor 

Federal Reserve Bank of New York 

William Dudley, President and Chief Executive Officer 

Office of Financial Research

Stacey Schreft, Deputy Director for Research and Analysis

Federal Insurance Office

Steven Seitz, Deputy Director

North Carolina Office of the Commissioner of Banks 

Jim Cooper, Senior Vice President for Policy, 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
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PRESENTERS:

Council Process for Applications Under Section 117 of the Dodd-Frank Act

• Bimal Patel, Deputy Assistant Secretary for the Council, Treasury 

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

Executive Director of the Council, Treasury 

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

Council, Treasury (available for questions) 

Update on Annual Reevaluation of Nonbank Financial Company Designation 

• Bimal Patel, Deputy Assistant Secretary for the Council, Treasury 

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

Council, Treasury 

Executive Session 

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

approximately 4:06 P.M. 

The Chairperson began by welcoming Jerome H. Powell, Chairman of the Federal Reserve, and 

Joseph Otting, Comptroller of the Currency, to their first meetings as members of the Council. 

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 of the meeting 

included (1) a vote on the minutes of the Council’s meeting on December 14, 2017; (2) the 

Council’s process for considering applications under section 117 of the Dodd-Frank Wall Street 

Reform and Consumer Protection Act (Dodd-Frank Act); and (3) an update on the annual 

reevaluation of the designation of a nonbank financial company. 

1. Resolution Approving the Minutes of the Meeting Held on December 14, 2017 

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

minutes attached hereto of the meeting held on December 14, 2017 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.

2. Council Process for Applications Under Section 117 of the Dodd-Frank Act

The Chairperson introduced the next agenda item, the Council’s process for considering 

applications under section 117 of the Dodd-Frank Act. Jay Clayton, Chairman of the SEC, did 

not participate in the discussion, and Michael Piwowar, SEC Commissioner, participated in the 

discussion. The Chairperson turned to Bimal Patel, Deputy Assistant Secretary for the Council 

at Treasury, and Eric Froman, Principal Deputy Assistant General Counsel (Banking and 

Finance) and Executive Director of the Council at Treasury. 
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Mr. Patel then presented on a potential framework for how the Council could consider appeals 

that are submitted to it generally under section 117 of the Dodd-Frank Act. Mr. Patel began by 

describing the application and purpose of section 117. He noted that section 117 applies to any 

entity (or its successor) that was a bank holding company with assets of at least $50 billion as of 

January 1, 2010, and participated in the Capital Purchase Program under the Troubled Asset 

Relief Program. He stated that under section 117, if such an entity ceases to be a bank holding 

company, it is automatically treated as if the Council had designated it as a nonbank financial 

company for Federal Reserve supervision and enhanced prudential standards. He noted that the 

Federal Reserve is responsible for determining whether an entity is a “successor” under section 

117 and that the Federal Reserve has indicated that it will do so on a case-by-case basis in 

consultation with the Council. 

Mr. Patel then described a process staff proposed for the Council to follow in considering 

applications under section 117. First, he noted that staff proposed that the Council consider an 

appeal under section 117 from an entity that either (1) has ceased to be a bank holding company 

or (2) has entered into an agreement for a transaction that would result in the entity ceasing to be 

a bank holding company. He noted that in the case of an entity that has not yet ceased to be a 

bank holding company, the Council could consider imposing conditions before granting an 

appeal. Mr. Patel stated that staff proposed that if an entity notifies the Council that it intends to 

submit an appeal to the Council, the company would be invited to meet with staff on the 

Council’s Nonbank Designations Committee before submitting its request to the Council under 

section 117. Mr. Patel also noted that the Council could, through the OFR, issue a data request 

to an applicant either before or after it submits its formal request to the Council. 

Mr. Patel then described the process for hearings under section 117. He noted that a company 

can initiate a request under section 117 at any time by submitting a hearing request to the 

Council. He explained that an applicant may request a written or oral hearing before the Council 

to appeal its treatment under section 117. He stated that upon receiving a request for a hearing, 

the Council must then hold a hearing within 30 days and that an applicant has a right to a written 

hearing. Mr. Patel then stated that staff proposed that the Council amend its existing hearing 

procedures so that they would apply to hearings under section 117. He noted that the Council’s 

existing hearing procedures currently apply only to nonbank financial company and financial 

market utility designations. He said that the hearing procedures describe the processes for 

requesting a hearing, specifying the hearing date, and conducting hearings. Mr. Patel noted that 

a written hearing involves a submission of written materials by the applicant to the Council, and 

that an oral hearing consists of an oral presentation by the applicant to the Council or its 

representatives at which Council members could ask questions. He stated that oral hearings

would be transcribed. 

Mr. Patel then described the statutory timeline for applications under section 117. He stated that 

the Council is required to issue an explanation of the basis for its proposed decision within 60 

days after a hearing. He said that the proposed basis would be submitted to Congress, provided 

to the applicant, and posted online. He said that staff proposed that before the Council issues a 

proposed decision, the Council would not publicly disclose the name of the applicant unless the 

applicant publicly discloses its appeal, and that any sensitive, confidential information in the 

Council’s analysis would be redacted from the public statements. Mr. Patel then stated that the 
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Council is required to issue an explanation of the basis for its final decision within 60 days after 

the later of (1) the date the Council submits its proposed decision to Congress or (2) if, within 

one year after the Council’s proposed decision, the Senate Banking or House Financial Services 

Committee holds a hearing on it, the date of the last such hearing. Mr. Patel stated that to 

comply with this deadline, staff proposed that the Council issue a final decision within 60 days 

after its proposed decision unless a Congressional hearing is scheduled by the end of that 60-day 

period. 

Mr. Patel then described the Council’s substantive analysis of applications under section 117. 

He stated that the Council is statutorily required to consider whether an applicant meets the 

statutory standards for the designation of a nonbank financial company under section 113 of the 

Dodd-Frank Act, and whether the applicant meets the statutory definition of “nonbank financial 

company” in the Dodd-Frank Act. He stated that staff proposed that the framework of the 

Council’s analysis would be similar to that used for the Council’s recently completed 

reevaluation of the designation of American International Group, Inc. Specifically, he stated that 

staff proposed that the Council’s analysis of applicants would be organized around the three 

transmission channels the Council used in evaluating nonbank financial companies under section 

113 of the Dodd-Frank Act (the exposure, asset liquidation, and critical function or service 

transmission channels), as well as the company’s regulatory scrutiny and complexity and 

resolvability. Mr. Patel noted that for an applicant that is a bank, staff proposed that the Council 

consider relevant bank-centric metrics (such as data reported by bank holding companies on the 

Federal Reserve’s systemic risk report, Form FR Y-15). 

Finally, Mr. Patel noted that if the Council denies an appeal under section 117, the Council is 

statutorily required to reevaluate its decision at least annually. He stated that staff proposed that 

for annual reevaluations under section 117, the Council would follow a process similar to its 

process for annual reevaluations of nonbank designations. 

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

analytic approaches the Council could apply in its analyses and the scope of permissible 

applicants under section 117. The Council took no formal action on the staff’s proposal. 

3. Other Business

The Chairperson then noted recent market volatility, and stated that markets had continued to 

operate in an orderly fashion. Members of the Council and William Dudley, President and Chief 

Executive Officer of the Federal Reserve Bank of New York, then provided updates on 

fluctuations in various asset classes (including cryptocurrency futures) and the impacts on 

financial institutions and markets. It was noted that recent volatility did not appear to have 

significant macroeconomic implications, and that markets had functioned in an orderly manner. 

Council members noted that they continue to monitor market developments. 

4. 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 
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Dodd-Frank Act. The Chairperson introduced Bimal Patel, Deputy Assistant Secretary for the 

Council at Treasury, and Stephen Ledbetter, Director of Policy in the Office of the Financial 

Stability Oversight Council at Treasury. Chairman Clayton recused himself from participating in 

the discussion, and Michael Piwowar, SEC Commissioner, participated in the discussion. 

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 the Council had invited the company to submit information to the Council as a part of 

the annual reevaluation. He stated that the staff analysis of the company was ongoing and that 

staff would consult with the company’s federal and state regulators. Mr. Ledbetter then provided 

an overview of the company. He described the company’s business, assets, and liabilities. He 

also described the company’s written submission to the Council in connection with the Council’s 

annual reevaluation of the designation. 

Mr. Ledbetter 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 and the 

existing regulatory scrutiny of the company. Mr. Patel then further described the preliminary 

staff analysis with respect to the three transmission channels. 

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

Council’s timing and process for conducting annual reevaluations, the statutory standards for the 

Council’s designations, and the company’s existing regulatory scrutiny.

5. Other Business

The Chairperson then noted that Treasury was working to restructure the OFR, and he introduced 

Ken Phelan, Acting Director of the OFR. Mr. Phelan explained that he and Treasury were 

working to cut the OFR’s expenses and reduce its workforce to create an organization that is 

leaner and better able to serve the Council. He stated that the OFR’s focus should be on serving 

the needs of the Council. Craig Phillips, Counselor to the Secretary at Treasury, then stated that 

the OFR is an important body and that Treasury is trying to improve it. The Chairperson then 

noted that the OFR is a resource for the entire Council and that he wants to ensure that it is a 

useful organization that serves the Council. 

The Chairperson adjourned the meeting at approximately 4:55 P.M.