Minutes of the Financial Stability Oversight Council

October 3, 2022 

PRESENT: 

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

Council (Council) 

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

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

videoconference)

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 (via videoconference)

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

member) 

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

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

Regulation (non-voting member) 

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

Division (non-voting member) 

GUESTS: 

Department of the Treasury (Treasury)

Nellie Liang, Under Secretary for Domestic Finance

Sandra Lee, Deputy Assistant Secretary for the Council

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 

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 

James McGraw, Senior Deputy Director, Division of Complex Institution Supervision and 

Resolution 

Securities and Exchange Commission 

Amanda Fischer, Senior Counselor 
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Commodity Futures Trading Commission 

Rahul Varma, Associate Director, Division of Market Oversight 

Consumer Financial Protection Bureau

Gregg Gelzinis, Advisor to the Director 

Federal Housing Finance Agency 

Christopher Dickerson, Senior Advisor 

Comptroller of the Currency 

Jay Gallagher, Acting Senior Deputy Comptroller for Supervision Risk and Analysis

National Credit Union Administration

Catherine Galicia, Chief of Staff

Office of the Independent Member with Insurance Expertise

Charles Klingman, Senior Policy Advisor (via videoconference)

Federal Reserve Bank of New York

Richard Crump, Financial Research Advisor, Capital Markets Function 

Office of Financial Research (OFR)

James Martin, Deputy Director, Operations 

Sriram Rajan, Associate Director, Research Analysis Center

Federal Insurance Office

Philip Goodman, Senior Insurance Regulatory Policy Analyst (via videoconference)

Texas Department of Banking 

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

Rhode Island Department of Business Regulation 

Ethan Sonnichsen, Managing Director, National Association of Insurance Commissioners 

Maryland Office of the Attorney General, Securities Division 

Vincente Martinez, General Counsel, North American Securities Administrators Association 

PRESENTERS:

Financial Stability, Energy Market, and International Market Developments 

• Patricia Zobel, System Open Market Account Manager pro tem, Markets Group, Federal 

Reserve Bank of New York

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

Reserve

• Lisa Ryu, Senior Associate Director, Division of Supervision and Regulation, Federal 

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

• Jeff Gerlach, Vice President, Quantitative Supervision and Research Unit, Federal 

Reserve Bank of Richmond (available for questions)

Digital Assets Report

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

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

Cloud Services Adoption in the Financial Sector

• Todd Conklin, Deputy Assistant Secretary for Cybersecurity and Critical Infrastructure

Protection, Treasury

Executive Session

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

approximately 2:04 P.M. She began by noting that this was the first in-person meeting of the 

Council since she had become Chairperson. She outlined the meeting agenda, which had 

previously been distributed to the members together with other materials. The agenda for the 

executive session was a presentation by staff of the Federal Reserve and CFTC on financial 

stability, energy market, and international market developments.

1. Financial Stability, Energy Market, and International Market Developments

The Chairperson introduced the meeting agenda item, a presentation from staff of the Federal 

Reserve and CFTC on financial stability, energy market, and international market developments. 

She introduced Patricia Zobel, System Open Market Account Manager pro tem in the Markets 

Group at the Federal Reserve Bank of New York.

Ms. Zobel stated that she would discuss recent financial developments in the United Kingdom 

(U.K.) and the impact of these events on U.S. financial markets. She discussed how the recent 

announcement of the U.K. fiscal package had affected U.K. markets, including changes in the 

yields of U.K. government debt denominated in British pounds, or Gilts. She discussed reports 

of deleveraging among liability-driven investors (LDI) to meet margin calls associated with 

rising yields. She said that the Bank of England had undertaken purchases of Gilts to address the 

associated market dysfunction, which stabilized markets and led to Gilt yields declining.

Ms. Zobel said that the financial volatility in the U.K. had contributed to asset price swings in 

U.S. markets and a modest tightening of financial conditions. She described the impact on asset 

prices and spreads, including Treasury yields and spreads of investment-grade mortgage-backed 

securities to Treasury securities. She noted that while liquidity in certain fixed-income markets 

had deteriorated, markets continued to function. She said that dollar funding conditions and 

commercial paper spreads both remained stable. She stated that it would be necessary to 

continue monitoring for any potential spillovers from U.K. developments.

Council members then asked questions and had a discussion, including regarding potential risks 

to defined-benefit pension funds in the U.K., risks related to LDI, continued monitoring of 
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financial markets and financial institutions, and coordination with U.K. regulators. 

The Chairperson then introduced William Bassett, Senior Associate Director of the Division of 

Financial Stability at the Federal Reserve; Lisa Ryu, Senior Associate Director of the Division of 

Supervision and Regulation at the Federal Reserve; and Rahul Varma, Associate Director of the

Division of Market Oversight at the CFTC.

Mr. Bassett stated that asset valuation pressures had lessened but remained high in housing and 

commercial real estate markets. He noted that households and the nonfinancial sector appeared

resilient, and that bank capital remained in the post-2010 range. He said that short-term funding 

markets had also remained resilient but should continue to be monitored. 

Ms. Ryu then described the impact of higher interest rates amid a slowing economy. She noted 

the impact of higher interest rates on banks’ net interest income, fair values of certain securities,

and deposit flows, and discussed potential liquidity concerns and credit risks. She also described 

the recent volatility in European energy and commodity markets and potential exposures of 

counterparties and banks.

Mr. Varma then stated that he would present on energy market risks, particularly in Europe. He 

noted that European gas and electricity prices were high and described recent policy responses in 

the European Union and U.K., including gas and power rationing in the U.K. He described the 

effects on the natural gas market from Russia leaving the system as a supplier, and he noted that 

U.S. natural gas production had recovered and was expected to continue to grow. Mr. Varma 

described the impact of energy market developments on the financial system, including the

significant increase in initial margin at central counterparties in Europe and the impact on 

margins in over-the-counter derivatives markets.

The Chairperson adjourned the executive session of the meeting at approximately 2:46 P.M.

Open Session

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

2:52 P.M. The Chairperson outlined the agenda for the open session, which included (1) a 

presentation and vote on the Council’s digital assets report, (2) votes on the charter of the 

Council’s Climate-related Financial Risk Advisory Committee and on its initial membership, (3) 

a presentation on cloud services adoption in the financial sector, and (4) a vote on the minutes of 

the Council’s meeting on September 23, 2022.

1. Digital Assets Report

The Chairperson turned to the first agenda item, a presentation on the Council’s digital assets

report in response to the Executive Order on Ensuring Responsible Development of Digital 

Assets, which was issued on March 9, 2022. She introduced Sandra Lee, Deputy Assistant 

Secretary for the Council at Treasury, and Jonathan Rose, Senior Economist at the Federal 

Reserve Bank of Chicago.
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Ms. Lee stated that staff from all the Council member agencies had collaborated to evaluate 

digital asset activities, with a focus on identifying potential risks to U.S. financial stability, 

evaluating the existing regulatory structure, and developing recommendations to address these 

risks. She said that the report that would be voted on at the meeting represented the outcome of 

these efforts. She stated that the report presented the views of the full range of federal and state 

regulators represented on the Council and highlighted key risks that policymakers should seek to 

address. 

Mr. Rose stated that the Council’s digital assets report addressed risks to U.S. financial stability, 

regulatory gaps, and recommendations for action. Mr. Rose stated that the report concluded that 

crypto-asset activities could pose risks to U.S. financial stability under certain conditions. He 

noted that those conditions are: first, if interconnections of crypto-asset activities with the 

traditional financial system or their overall scale were to grow; and second, if that growth were 

to occur without adherence to or being paired with appropriate regulation, including enforcement 

of the existing regulatory structure. He stated that the report highlighted stablecoin activities as a 

notable source of potential interconnections with the traditional financial system. Mr. Rose said 

that the report also detailed sources of acute instability arising from speculation-driven cryptoasset prices; interconnections within the crypto-asset ecosystem; operational vulnerabilities; 

funding mismatches and run risk; and leverage.

Turning to the regulation of digital assets, Mr. Rose stated that the report placed particular 

emphasis on compliance with and enforcement of the existing regulatory structure as a key step 

in addressing financial stability risks. He said that the report also noted that many nonbank firms 

in the crypto-asset ecosystem had advertised themselves as regulated. He noted that many firms, 

for example, emphasize their registration as money services businesses, although such regulation 

does not provide a comprehensive framework for mitigating financial stability vulnerabilities. 

He stated that while some firms in the crypto-asset ecosystem had attempted to avoid regulation, 

other firms had engaged with the existing regulatory system by obtaining trust charters or special 

state-level crypto-asset-specific charters or licenses. 

Mr. Rose stated that although the existing regulatory system covers large parts of the cryptoasset ecosystem, the report identified three gaps in the regulation of crypto-asset activities in the 

United States. He said the first gap is that the spot market for crypto assets that are not securities 

is subject to limited direct federal regulation. He noted that, as a result, this market may not be 

subject to a regulatory framework designed to ensure orderly and transparent trading, prevent 

conflicts of interest and market manipulation, and protect investors and the financial system 

more broadly. He said that the report recommended that Congress enact legislation providing 

rulemaking authority for federal financial regulators over this market.

Mr. Rose said that the second gap is that businesses in the crypto-asset market do not have a 

consistent or comprehensive regulatory framework and can engage in regulatory arbitrage. He 

said that some crypto-asset businesses may have affiliates or subsidiaries operating under 

different regulatory frameworks, with no single regulator having visibility into the risks across 

the entire business. He noted that, to address the risk of regulatory arbitrage, the report 

recommended continued coordination; legislation addressing the risks posed by stablecoins; 

legislation relating to regulators’ authorities to have visibility into and supervise the activities of 
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all the affiliates and subsidiaries of crypto-asset entities; and appropriate service provider 

regulation. 

Mr. Rose said that the third gap is that a number of crypto-asset trading platforms had proposed 

offering retail customers direct access to markets by vertically integrating the services provided 

by intermediaries such as broker-dealers or futures commission merchants. He said that financial 

stability and investor protection risks may arise from retail investors’ exposure to some practices 

frequently proposed by vertically integrated trading platforms, such as automatically and rapidly 

closing out customer positions. He stated that the report therefore recommended study of 

potential vertical integration by crypto-asset firms.

Following the presentation, the Chairperson noted that the Council works to identify, address and 

foster resilience to vulnerabilities in the U.S. financial system. She said that these vulnerabilities 

include those arising from new and emerging technologies and sectors. She stated that in a 

speech in April 2022, she had argued that the government should promote responsible innovation 

that works for all Americans, protects U.S. national security interests and the planet, and 

contributes to economic competitiveness and growth. She said that innovation is one of the 

hallmarks of a vibrant financial system and economy, but history had demonstrated that 

innovation without adequate regulation can result in significant disruptions and harm to the 

financial system and to individuals. She stated that digital assets had grown significantly in scale 

and scope over recent years, attracting a large amount of capital and interest from both retail and 

institutional investors. She stated that, at the same time, significant shocks in volatility had 

occurred within the crypto-asset system, particularly over the last year.

The Chairperson stated that, given this potential for instability, the Council in February 2022 

identified digital assets as one of its key priorities for the year. She said that the Council’s digital 

assets report found that the current regulatory framework had helped largely insulate traditional 

financial institutions from crypto-asset-related financial stability risks, but the report noted that 

crypto-asset activities could pose risks to U.S. financial stability if their interconnections with the 

traditional financial system or their overall scale were to grow without adherence to or being 

paired with appropriate regulation, including enforcement of the existing regulatory structure. 

She stated that the report also identified a number of material gaps in current regulation and 

recommendations to address these gaps. 

The Chairperson stated that some of the report recommendations were focused on actions that 

Council member agencies can take with existing authorities and noted that other actions would 

require Congress to provide new authorities. She said that the report contributed to the analysis 

of digital asset issues that appeared in other recent reports prepared in response to the President’s 

Executive Order on Ensuring Responsible Development of Digital Assets, including reports on 

the future of money and payments, consumer and investor protection, illicit finance, and a 

framework for international engagement. She said that each of these reports was intended to 

provide guidance to policymakers in mitigating the risks of digital assets, while realizing their 

potential benefits. She said that the reports also enabled the public to better understand digital 

assets. The Chairperson then called on other Council members to comment on the Council’s 

digital assets report. 
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Jerome Powell, Chair of the Federal Reserve, stated that he supported the report and its 

recommendations. He stated that it is important to establish a federal prudential framework to 

address the risks presented by digital assets. He said that acting now would allow Council 

members to support responsible innovation while preserving financial stability.

Gary Gensler, Chair of the SEC, stated that he supported the report. He noted that Bitcoin, the 

first significant crypto token, was proposed 14 years ago this month, in the midst of the financial 

crisis. He said that its creator wrote about a new way to transmit value on the Internet without a 

central intermediary. Addressing the current crypto market, Chair Gensler first stated that this 

market is a highly volatile, speculative investment class. Second, he said that the market is not 

decentralized. He noted that the industry is populated by large, concentrated intermediaries, 

which are often an amalgam of services that are typically separate from each other in the rest of 

the securities markets. Third, he stated that the crypto industry cannot exist outside of a public 

policy framework. He stated that this framework includes protecting investors and consumers, 

addressing illicit activity, and supporting financial stability. He said that regardless of 

terminology such as crypto token, stablecoin, or decentralized finance platform, the public policy 

goals remain the same: treat like cases alike. 

Chair Gensler said that in his view the vast majority of the nearly 10,000 tokens in the crypto 

market are securities, although some are not. He noted that offers and sales of crypto tokens are 

covered by the securities laws if they are securities, and said that since most crypto tokens are 

securities, many crypto intermediaries are transacting in securities and must register with the 

SEC in some capacity. He stated that as the Council’s digital assets report noted, there is a 

difference between regulatory arbitrage and non-compliance. He said that there was a significant 

amount of non-compliance with applicable laws and regulations in the crypto market, and noted 

that all market participants benefit from compliance with these requirements, which also 

increases investor confidence in the market. He said that he had therefore asked SEC staff to 

work with market participants to help ensure that investors in the crypto market receive 

established protections that exist in other securities markets. He stated that he also looked 

forward to working with Congress to achieve the public policy goals set forth in the digital assets 

report, consistent with maintaining the regulation of crypto security tokens and related 

intermediaries at the SEC.

Chair Gensler said that a framework currently exists in the event that crypto intermediaries may 

need to register with both the SEC and CFTC in the future, since the two agencies maintain dual 

registrants in the broker-dealer space and in the fund advisory space. He said that if bank 

regulators receive authority related to the safety and soundness of stablecoins, as recommended 

by the report on stablecoins issued by the President’s Working Group on Financial Markets

(PWG), market regulators should maintain conduct authority over stablecoins available through

intermediaries overseen by these regulators. He concluded by stating that the SEC would 

continue to focus on investor protection and resiliency in the crypto market.

Michael Hsu, Acting Comptroller of the Currency, stated that he supported the report and wanted 

to draw attention to the recommendations focused on minimizing regulatory arbitrage. He said 

that the 2008 financial crisis illustrated that when regulators do not coordinate effectively on 

risks that cut across jurisdictional lines, an un-level playing field emerges and financial stability 
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risks grow in the shadows. He said that for the Council to work as intended, each member must 

consider financial stability from a systemwide perspective. He stated that this is particularly 

important in emerging areas like crypto. He said that it was critical for the Council and for 

Congress to prioritize the fourth recommendation in the report, regarding interagency 

coordination; the fifth recommendation, regarding the federal prudential framework for 

stablecoin issuers; and the sixth recommendation, regarding regulatory visibility and authorities 

over all of the activities of crypto-asset entities. He said that properly implemented, these 

recommendations would help mitigate regulatory arbitrage and reduce risks to financial stability. 

He stated that in the meantime, the OCC was committed to ensuring that the nexus between 

crypto and the federal banking system does not become a channel for cross-contagion, while also 

supporting responsible innovation and progress. 

Martin Gruenberg, Acting Chairman of the FDIC, stated that he supported the report, and said 

that it provided a valuable overview and analysis of the financial stability risks of digital assets 

and a useful set of recommendations. He said that the report also provided an important 

overview of the existing regulatory and enforcement authorities and how they might be 

effectively applied to digital assets, and highlighted the significant existing coordination efforts 

among the member agencies regarding digital assets and how they might be strengthened. He 

said that the report represented a valuable addition to the Council’s understanding of this issue 

and how Council members might approach it. 

Rostin Behnam, Chairman of the CFTC, stated that he supported the report, and expressed his 

agreement with Chair Gensler’s comments. He noted the CFTC’s enforcement efforts in the area 

of digital assets. He stated that the report identified gaps in the authority of the CFTC and SEC,

and said that the CFTC and SEC would need to collaborate to ensure that they leverage their 

existing authorities until new authority is provided. He said that he looked forward to working 

with the Council and Congress to ensure these gaps are filled as soon as possible.

Charles Cooper, Commissioner of the Texas Department of Banking, stated that he supported the 

report. He said that the report and its recommendations should inform the work that Council 

member agencies undertake as individual agencies and on an interagency basis to balance 

responsible innovation with safeguarding financial markets and consumers. He noted that, as in 

other points in history, states had been laboratories of innovation regarding digital assets, the 

risks involved, and how to best protect citizens. He said that state bank regulators intended to 

share what they had learned and would work with other agencies and Congress to protect the 

U.S. financial system, while allowing for prudent innovation and acknowledging the roles of 

various regulators in supervision and consumer protection. He said that the report highlighted 

the importance of cooperative federalism. He stated that state bank regulators would welcome a 

digital asset regulatory framework that stresses the importance of coordination between the states 

and the federal government, as well as interagency coordination, in developing policy and 

supervising digital asset activity.

Rohit Chopra, Director of the CFPB, expressed his support for the report and said that he wanted 

to comment on the connections between stablecoins and the payment system. He noted that both 

the private and public sectors were offering new ways to transfers funds using digital assets. He 

said that stablecoins pose opportunities and risks. He stated that stablecoins are overwhelmingly 
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used in speculative crypto-asset trading, and are not yet ready for consumer payments. He said 

that stablecoins could quickly scale if powered by a major platform or other network with 

significant market penetration, which would have implications for the larger financial system. 

He stated that, as discussed in the report, the crypto ecosystem’s leverage, opacity, liquidity 

transformation and associated risks could disrupt the broader financial system. He said that 

Council members should be on alert, given that stablecoin arrangements pose more imminent 

concerns than other parts of the crypto-asset ecosystem, especially as banks, large technology

companies, and peer-to-peer providers explore launching their own stablecoins.

Director Chopra stated that certain Council member agencies had already taken steps to address 

discrete issues, such as deposit insurance misrepresentation, and were making efforts to address 

concerns related to fraud, hacks, and scams in the payment system. He said that member 

agencies should leverage their existing authorities and seek to obtain additional authorities 

through legislation. He noted that in November 2021, the PWG recommended that the Council 

consider using its existing authorities to enhance the regulation of stablecoins, absent 

comprehensive legislation. He said that the Council could evaluate its authorities under Title 

VIII of the Dodd-Frank Wall Street Reform and Consumer Protection Act as one potential way 

for federal regulators to seek greater visibility into the stablecoin ecosystem and heighten 

safeguards where appropriate. He said that the digital assets report would help member agencies 

coordinate between federal and state agencies, evaluate their existing authorities, and ultimately 

mitigate risks to the payment system and the U.S. financial system.

The Chairperson then presented to the Council the following resolution approving the Council’s 

digital assets report:

WHEREAS, the duties of the Financial Stability Oversight Council (Council) under section 112 

of the Dodd-Frank Wall Street Reform and Consumer Protection Act include monitoring the 

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

monitoring financial regulatory proposals and developments, 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 Council member 

agencies and other federal and state agencies; recommending to the Council member agencies

general supervisory priorities and principles reflecting the outcome of discussions among the 

member agencies; and identifying gaps in regulation that could pose risks to U.S. financial 

stability; and

WHEREAS, on March 9, 2022, the President issued Executive Order 14067, “Ensuring 

Responsible Development of Digital Assets” (the Digital Assets EO), which sets forth the 

principal policy objectives of the United States with respect to digital assets: protecting 

consumers, investors and businesses in the United States; protecting U.S. and global financial 

stability and mitigating systemic risk; mitigating the illicit finance and national security risks 

posed by misuse of digital assets; reinforcing U.S. leadership in the global financial system and 

in technological and economic competitiveness, including through the responsible development 

of payment innovations and digital assets; promoting access to safe and affordable financial 

services; and supporting technological advances that promote responsible development and use 

of digital assets; and
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WHEREAS, the Digital Assets EO states that, within 210 days of the date of the Digital Assets 

EO, the Secretary of the Treasury should convene the Council and produce a report outlining the 

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

providing recommendations to address such risks; and

WHEREAS, the Digital Assets EO further states that, as the Secretary of the Treasury and the 

Council deem appropriate, the report should consider the particular features of various types of 

digital assets and include recommendations that address the identified financial stability risks 

posed by these digital assets, including any proposals for additional or adjusted regulation and 

supervision as well as for new legislation, and that the report should take account of the prior 

analyses and assessments of the Council, agencies, and the President’s Working Group on 

Financial Markets, including the ongoing work of the Federal banking agencies, as appropriate; 

and

WHEREAS, the members of the Council have consulted extensively and have drawn on the 

expertise of the staffs of their agencies to formulate the Council’s assessment of financial 

stability risks and regulatory gaps posed by various types of digital assets, and recommendations 

to address such risks; and 

WHEREAS, the staffs of Council members and their agencies have prepared the draft “Report 

on Digital Asset Financial Stability Risks and Regulation” attached hereto (the Digital Assets 

Report).

NOW, THEREFORE, BE IT RESOLVED, that the Council hereby approves the Digital Assets 

Report and authorizes the Chairperson, or her designee, to cause the Digital Assets Report to be 

published on the Council’s website, 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; and

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 

Digital Assets Report, and to take such other actions and issue such other documents incidental 

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. Climate-related Financial Risk Advisory Committee

The Chairperson turned to the next agenda item, the establishment of the Climate-related

Financial Risk Advisory Committee (CFRAC). She noted that this would be the Council’s first 

external advisory committee. She stated that climate-related financial risk is complex to 

evaluate, reflecting the complicated transmission channels linking transition and physical risks to 

the economy and financial sector. She said that Council member agencies had made progress in 
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improving the Council’s understanding of these risks, but that the Council could benefit from the 

expertise of individuals appointed to the CFRAC. She said that the CFRAC would be a crucial 

resource to help the Council gather information and analysis from a broad array of stakeholders 

and advance its understanding of climate-related financial risks. The Chairperson said that the 

CFRAC’s initial class of members would bring diverse and expert perspectives to the Council’s 

climate-related work. She noted that its members were drawn from academia, non-governmental 

consumer and environmental organizations, and small and large financial institutions. The 

Chairperson stated that the CFRAC would help the Council receive and analyze information on 

climate-related financial risks. She said that addressing climate-related financial risks is an 

urgent priority that would require the collective efforts of both the public and private sectors.

The Chairperson then presented to the Council the following resolution adopting the CFRAC

charter:

WHEREAS, section 111(e)(2) of the Dodd-Frank Wall Street Reform and Consumer Protection 

Act (Dodd-Frank Act) provides that the Financial Stability Oversight Council (Council) shall 

adopt such rules as may be necessary for the conduct of the business of the Council; and

WHEREAS, on October 21, 2021, the Council approved a Report on Climate-related Financial 

Risk (Climate Report), which stated that the Council would form a Climate-related Financial 

Risk Advisory Committee (CFRAC); and 

WHEREAS, the staffs of the Council members and their agencies have prepared the attached 

charter for the CFRAC (CFRAC Charter); and 

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

approve and adopt the CFRAC Charter.

NOW, THEREFORE, BE IT RESOLVED, that the Council hereby approves and adopts the 

CFRAC Charter; and 

BE IT FURTHER RESOLVED, that the Council hereby authorizes the CFRAC Charter to be 

published on the Council’s website, in a form and manner acceptable to the Chairperson or her 

designee; and 

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 

CFRAC Charter, and to take such other actions as they may deem 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 initial 

membership of the CFRAC:
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WHEREAS, on October 3, 2022, the Financial Stability Oversight Council (Council) approved 

and adopted the charter (Charter) of the Climate-Related Financial Risk Advisory Committee 

(CFRAC); and 

WHEREAS, the Charter provides that Council members and staffs of Council members and 

Council member agencies may propose candidates for CFRAC membership, from which group 

the Office of the Financial Stability Oversight Council (Council Secretariat) at the Department 

of the Treasury will select a slate of proposed members, and the Council’s Deputies Committee 

will consider the proposed slate, make any revisions (subject to Council Secretariat approval), 

and submit a recommended slate of members to be approved by vote of the Council; and

WHEREAS, in accordance with the Charter, the Deputies Committee has submitted the attached 

slate of members (the Member Slate) to the Council and recommends that the Council approve 

the Member Slate.

NOW, THEREFORE, BE IT RESOLVED, that the Council hereby approves the Member Slate; 

and

BE IT FURTHER RESOLVED, that the Council hereby authorizes the Member Slate to be 

published on the Council’s website, in a form and manner acceptable to the Chairperson or her 

designee; and

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

or her designee, to take such actions as they may deem necessary or appropriate to fulfill the 

Council’s objectives in connection with the foregoing.

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

The Council approved the resolution by unanimous vote.

3. Cloud Services Adoption in the Financial Sector

The Chairperson then turned to the next agenda item, a presentation on the upcoming Treasury 

report on the financial sector’s use of cloud services and related cybersecurity implications. She 

introduced Todd Conklin, Deputy Assistant Secretary for Cybersecurity and Critical 

Infrastructure Protection at Treasury.

Mr. Conklin stated that he would update the Council on work that Treasury and its partners in the 

Financial and Banking Information Infrastructure Committee (FBIIC) were engaged in regarding 

cybersecurity and critical infrastructure. He said that earlier in 2022, Treasury, in coordination 

with the FBIIC, had begun working on a report on cloud services and potential implications for 

operational resilience. He stated that Treasury intended to publish a report on this effort by the 

end of 2022. He stated that Treasury was supported in this effort by a group of experts from 

FBIIC member agencies. He stated that this was an important effort for Treasury and the FBIIC 

not just because of the subject matter, but also as a learning exercise for the FBIIC to gather and 

share information on a proactive basis and generate a common sector-wide operating picture on 

an emerging issue. 
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Mr. Conklin stated that the report would focus on public cloud services and the use by the 

financial sector of three major cloud models. He said that the first model was software-as-aservice, which involves the use of cloud-based applications over the Internet on a subscription 

basis, like video conferencing or productivity software. He said that the second model was 

platform-as-a-service, which allows customers to build custom cloud applications without having 

to manage the underlying servers or application environment. He said that the third model was

infrastructure-as-a-service, which offers nearly full control of computing, storage and networking 

resources on demand.

Mr. Conklin said that Treasury and the FBIIC initially focused on concentration and critical 

infrastructure. He stated that in the preceding few months, they had also considered cloud 

adoption at small and medium-sized financial institutions like community banks and credit 

unions. He stated that the report would assess how cloud services are currently being used, how 

they may evolve, and what gaps may exist that could impact the sector’s operational resilience. 

He noted that third‐party services can introduce new risks when used inappropriately but can also 

reduce risks when used appropriately. He stated that the private sector, not the government, has 

responsibility for design, implementation and risk management of cloud and other third-party 

services. He noted that, at the same time, transparency from the government, including Treasury 

and the financial regulators, is crucial to promoting effective resilience in the sector. He said that 

Treasury and the FBIIC intended that the report would help inform the financial sector and 

promote constructive cooperation among financial institutions and cloud service providers. 

Mr. Conklin said that Treasury and the FBIIC, in developing their analysis, were considering a 

wide range of input in an effort to ensure that the report conclusions are data driven and 

technically sound. He said that they were relying on four primary sources for the report. He 

stated that the first source was input from FBIIC members through a stock-take of their own 

experiences and observations in each area of the sector. He said that the second source was 

information contributed by Treasury, including lessons learned from Treasury’s own cloud 

adoption experience, as well as from interagency and international engagement. He said that the 

third source was relevant literature published since Treasury last examined cloud services in 

2018. He stated that the fourth source was discussions with chief information officers and chief 

information security officers from both cloud service providers and financial institutions, as well 

as independent experts and industry trade associations.

Mr. Conklin stated that Treasury and the FBIIC had spoken with dozens of organizations as part 

of this process. He said that one of the questions they had been evaluating is the extent to which 

the financial sector has started using cloud services. He said that they do not have firm statistics 

on adoption of cloud services by the financial sector, but that information they had received from 

stakeholders and FBIIC members confirmed that the levels of adoption still vary widely across 

the sector. He stated that since the onset of the COVID-19 pandemic, many software-as-aservice applications had become commonplace, but the use of more complex services like 

infrastructure-as-a-service to run core processing for regulated financial services is still rare 

across the industry. He stated that while some large financial institutions are pursuing strategies 

to dramatically reduce their on-site data center footprints, most are pursuing an iterative, hybrid 

strategy that relies on public, private, and on-site infrastructure. He stated that large banks and 

financial market infrastructures are interested in continuing to explore cloud services and many 
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have developed long‐term plans to do so. He stated that Treasury and the FBIIC expected

continued growth in cloud adoption as it becomes more of a mainstream technology. He said 

that this trend underscores the importance of understanding the benefits and risks of financial 

institutions’ reliance on these services. 

Mr. Conklin stated that Treasury and the FBIIC were also examining issues relating to the use of 

cloud services by smaller financial institutions. He said that key issues for these institutions 

include securing the right balance of transparency from the cloud service provider to its clients 

on due diligence and incidents, difficulties for smaller firms in negotiating service contracts, and 

how the overall cybersecurity talent gap leads to challenges in the cloud services context. He 

stated in conclusion that as Treasury and the FBIIC develop the report and continue to work on 

these issues, they would collaborate with the private sector and organizations like the Cyber Risk 

Institute, FBIIC members, and their international partners, many of which are also considering 

increasing their oversight of cloud service providers.

Following the presentation, the Chairperson stated that the COVID‐19 pandemic had accelerated 

the adoption of cloud services by financial institutions. She noted that cloud services, when 

configured appropriately, can benefit operational resilience at the individual firm level. She said 

that the interdependency of these networks can, however, magnify cyber risks, threatening the 

operations not just of individual institutions but of the larger financial sector. She said that it was 

therefore critical that the Council review how these services may affect the financial sector’s 

operational resilience and develop a common understanding of the potential opportunities and 

risks of cloud adoption. The Chairperson then called on other Council members to comment on 

the presentation. 

Director Chopra stated that cloud services are growing in importance across every international 

jurisdiction. He noted the widespread transition to the cloud across the U.S. economy, and said it

is important for the Council to understand how these developments are specifically affecting the 

financial sector. 

4. Resolution Approving the Minutes of the Meeting Held on September 23, 2022 

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

minutes attached hereto of the meeting held on September 23, 2022 of the Council are hereby 

approved. 

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

The Council approved the resolution by unanimous vote.

The Chairperson adjourned the meeting at approximately 3:27 P.M.