Minutes of the Financial Stability Oversight Council

December 17, 2021

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)

Jelena McWilliams, Chairman, Federal Deposit Insurance Corporation (FDIC) 

Gary Gensler, Chair, Securities and Exchange Commission (SEC) 

Rostin Behnam, Acting Chairman, Commodity Futures Trading Commission (CFTC)

Rohit Chopra, Director, Consumer Financial Protection Bureau (CFPB)

Sandra L. Thompson, Acting 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 

Dino Falaschetti, 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)

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

Laurie Schaffer, Principal Deputy General Counsel

Sandra Lee, Deputy Assistant Secretary for the Council

Eric Froman, Assistant General Counsel (Banking and Finance) 

Sean Hoskins, Acting 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

Travis Hill, Deputy to the Chairman for Policy

Securities and Exchange Commission

Amanda Fischer, Senior Counselor

Commodity Futures Trading Commission

David Gillers, Chief of Staff
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Consumer Financial Protection Bureau

Ashwin Vasan, Senior Advisor to the Director

Federal Housing Finance Agency

Naa Awaa Tagoe, Acting Deputy Director, Division of Housing Mission and Goals

Comptroller of the Currency

Blake Paulson, 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 and Chief Executive Officer 

Richard Crump, Vice President, Capital Markets Function

Office of Financial Research

Michael Passante, Chief Counsel

Federal Insurance Office

Philip Goodman, Senior Insurance Regulatory Policy Analyst

Texas Department of Banking

Michael Townsley, Policy Counsel, Conference of State Bank Supervisors

Maine Bureau of Insurance

Ethan Sonnichsen, Managing Director of Government Relations, National Association of 

Insurance Commissioners

Maryland Office of the Attorney General, Securities Division

Vincent Martinez, General Counsel, North American Securities Administrators Association 

PRESENTERS:

SEC Policy Agenda and Proposed Rulemakings

• Gary Gensler, Chair, SEC

Crypto-asset Policy Sprint Initiative

• Molly Mahar, Senior Associate Director, Division of Supervision and Regulation, 

Federal Reserve 

• Grovetta Gardineer, Senior Deputy Comptroller for Bank Supervision Policy, OCC

• Travis Hill, Senior Advisor to the Chairman, FDIC
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Climate-related Financial Risks

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

2021 Annual Report

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

• Jonathan Rose, Senior Economist, Federal Reserve Bank of Chicago (available for 

questions)

• Alexandra Somers, Senior Policy Advisor, Office of the Financial Stability Oversight 

Council, Treasury (available for questions)

Climate-related Financial Risk Committee 

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

LIBOR Transition

• Michael Gibson, Director, Division of Supervision and Regulation, Federal Reserve 

Executive Session

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

approximately 10:00 A.M. The Council convened by videoconference. The Chairperson 

outlined the meeting agenda, which had previously been distributed to the members together 

with other materials. The agenda for the executive session included (1) the SEC’s policy agenda 

and proposed rulemakings, (2) the crypto-asset policy sprint initiative undertaken by the Federal 

Reserve, FDIC, and OCC, and (3) climate-related financial risks.

1. SEC Policy Agenda and Proposed Rulemakings

The Chairperson turned to the first agenda item, an update on the SEC’s policy agenda and 

proposed rulemakings. She turned to Gary Gensler, Chair of the SEC, for the presentation. 

Chair Gensler first described the SEC’s three-part mission: to protect investors; maintain fair, 

orderly and efficient markets; and facilitate capital formation. He provided an overview of 

upcoming SEC initiatives, including projects focused on market structure, issuers, funds and 

advisers, and remaining initiatives under the Dodd-Frank Wall Street Reform and Consumer 

Protection Act (Dodd-Frank Act). He then described each area in greater detail. 

Chair Gensler first described the SEC’s key initiatives with respect to equity markets, including 

the clearing and settlement cycle, market structure, and digital engagement practices. With 

respect to Treasury markets, he highlighted the SEC’s efforts regarding dealer registration for 

principal trading firms and member clearing requirements. He also described efforts related to 

transparency in non-Treasury fixed income markets, and potential rulemakings or projects 

related to security-based swaps and crypto trading and lending platforms. Chair Gensler then 

described the SEC’s key initiatives related to issuers, including disclosures regarding climate and 

cybersecurity risks; special purpose acquisition companies; amendments the SEC had recently 

proposed to the trading safe harbor for executives and issuers under the SEC’s Rule 10b5-1; 

certain China-related issues, including related to auditor inspections; and crypto tokens. Chair 
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Gensler then described key initiatives related to funds and advisers, including a recently 

approved proposal for money market fund reforms; proposals related to open-end bond funds

and amendments to the SEC’s Form PF; the SEC’s environmental, social and governance fund 

name rule; cybersecurity risk; private fund fee disclosures; and certain crypto-related matters. 

Finally, he said that the SEC would be undertaking several initiatives to adopt rules under the 

Dodd-Frank Act, including with respect to securities lending, short sale disclosures, and 

executive compensation. Chair Gensler concluded by noting that the SEC is also working on 

various other initiatives and expressed interest in collaborating with other Council member 

agencies. 

Council members then had a discussion about upcoming SEC initiatives, expressing support for 

certain initiatives and for collaboration among Council members and member agencies. 

2. Crypto-asset Policy Sprint Initiative

The Chairperson then introduced the next agenda item, a presentation on the crypto-asset policy 

sprint initiative undertaken by the Federal Reserve, FDIC, and OCC. She introduced Molly 

Mahar, Senior Associate Director in the Division of Supervision and Regulation at the Federal 

Reserve, Grovetta Gardineer, Senior Deputy Comptroller for Bank Supervision Policy at the 

OCC, and Travis Hill, Senior Advisor to the Chairman at the FDIC.

Ms. Gardineer began by stating that the Federal Reserve, FDIC, and OCC had embarked on a 

series of “policy sprints” during the summer of 2021. She said that the undertaking was based on 

the technology sprint model, which involves a small group of individuals with diverse expertise 

working together on an issue for a short period of time. She stated that the purpose of this sprint 

was to enhance the collective knowledge of the federal banking agencies regarding crypto-asset 

activities. She said that the agencies undertook three sprints, which were designed to develop a 

common crypto-asset vocabulary; analyze a range of potential crypto-asset activities conducted 

by banking organizations and associated risks, and review public comments received in response 

to the FDIC’s May 17, 2021 request for information on digital assets; and identify potential 

policy gaps and opportunities to provide clarity. She noted that, in connection with their

analysis, the agencies also engaged in outreach to stakeholders from each sector.

Ms. Gardineer stated that the agencies focused on the custody of crypto-assets, which underpins 

other crypto-services banks might offer. She stated that the custody of crypto-assets is different 

than other asset classes, due to the reliance on a cryptographic key, an alphanumeric password 

that provides access to associated digital assets. She said that banking organizations providing 

custody services may also offer related features, such as tax reporting, valuation services, and

record-keeping, along with ancillary custodial services.

Mr. Hill then discussed lending practices involving crypto-assets, noting that a small number of 

banking organizations have begun offering loans secured by crypto-assets. He said that these 

loans may include requirements to maintain collateral levels above bank-established thresholds. 

He also noted that lenders may take crypto-assets into custody or use a third-party custodian to 

secure the collateral. 
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Mr. Hill also explained that banks are experimenting with blockchain to facilitate payment, 

clearing, and settlement activities, including for cross-border payments and intraday repurchase 

agreement transactions. He also noted banks’ interest in participating in stablecoin 

arrangements.

Ms. Mahar then addressed how banking organizations are facilitating the trading of cryptoassets. She noted that some banking organizations are seeking to offer customers the ability to 

buy, hold, and sell crypto-assets, typically through a third party, in response to demand from 

retail and institutional customers. She noted that some banking organizations are also offering 

their customers indirect exposure through derivatives and investment funds. She noted that staff 

are assessing these activities, and banking organizations’ related controls, to identify any gaps.

Ms. Mahar then described next steps for the agencies on this topic. She noted that the agencies 

issued an interagency statement on November 23, 2021 that described initiatives in their 2022 

workplan, including providing greater clarity on permissibility, and developing interagency 

supervisory expectations on crypto-asset custody activities, loans collateralized by crypto-assets, 

and the facilitation of crypto-asset trading. She also noted that the agencies would develop a 

regulatory and supervisory framework for banking organizations’ participation in stablecoin 

arrangements.

Council members then asked questions and had a discussion about the crypto-asset policy sprint

initiative, including the letter issued by the NCUA on December 16, 2021 addressing the 

authority of federally insured credit unions with respect to certain digital asset services, the use 

of private keys in connection with crypto-asset technology, and the treatment of crypto-asset 

holdings in the loan underwriting process. 

3. Climate-related Financial Risks

The Chairperson next introduced the next agenda item, the update on climate-related financial 

risks. She introduced Sandra Lee, Deputy Assistant Secretary for the Council at Treasury.

Ms. Lee noted that the Council issued a report on climate-related financial risk on October 21, 

2021. Ms. Lee said that the climate report stated that the Council would establish a Climaterelated Financial Risk Committee (CFRC) within 60 days. She noted that the Council would 

vote at this meeting on creating the new staff-level committee. She said that the proposed 

committee charter would establish the CFRC and formalize its purposes, duties, and operating 

structure. She stated that, as outlined in the climate report, the CFRC would play a central role 

in interagency collaboration, to identify, assess and mitigate climate-related risks to the financial 

system. 

Ms. Lee stated that in the preceding weeks, Council member agency staff had held discussions 

regarding the actions that Council member agencies plan to undertake related to the report’s 

recommendations, and how the Council can most effectively facilitate interagency coordination. 

She noted that some member agencies were engaging in outreach, others were developing 

internal workstreams, and others were assessing their data and analytical needs. She noted that 

member agencies would work together to focus on key themes that emerged from the bilateral 
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meetings, which included data access and availability, data infrastructure, and information 

sharing and coordination.

Ms. Lee stated that if the CFRC charter was adopted at this meeting, staff would develop a 

proposed CFRC workplan. She also noted that, as stated in the report, the CFRC would provide 

at least semi‐annual updates to the Council on the status of efforts by the Council and its member 

agencies to identify and address climate-related financial risks. 

Council members then had a discussion about the CFRC and the efforts of Council member 

agencies regarding climate-related risks.

The Chairperson adjourned the executive session of the meeting at approximately 10:55 A.M.

Open Session 

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

11:01 A.M. 

The Chairperson outlined the agenda for the open session, which included (1) a presentation and 

vote on the Council’s 2021 annual report, (2) a vote on the charter of the Council’s Climaterelated Financial Risk Committee, (3) an update on the LIBOR transition, and (4) a vote on the 

minutes of the Council’s meeting on November 15, 2021.

1. 2021 Annual Report

The Chairperson turned to the first agenda item, a vote on the Council’s 2021 annual report. She 

stated that the report analyzed recent episodes of financial turmoil to understand weak points in 

the financial system and identified potential threats. She noted that it reviewed actions taken by 

the Council to strengthen the financial system and recommended additional steps that could be 

taken by the public and private sectors. She stated that the report marked nearly two years since 

the first appearance of COVID-19 and the resulting financial turmoil in March 2020. She noted 

that as the economy began to shut down that month, many investors sought safety in the form of 

cash and short-term government securities. She also noted that corporate and municipal bond 

markets became illiquid. She stated that increased capital and liquidity helped banks weather the 

crisis. She said that the episode showed that the financial system was more shock-resistant than 

it was in 2008. She said that the annual report demonstrated that the lessons of 2008 and 2020 

strongly inform the Council’s work. She stated that she would review three key priorities for the 

Council that she outlined in March 2021 in her first meeting as Chairperson of the Council. 

The Chairperson said the first priority was nonbank financial intermediation, including money 

market funds, open-end mutual funds, and hedge funds. She noted that the events of March 2020 

demonstrated that open-end mutual funds and prime money market funds could amplify 

liquidation pressures because of liquidity risks in their business models and the incentives they 

give to investors. She said the same held true for hedge funds, because of their use of leverage. 

She noted that the annual report reviewed the Council’s progress on work related to these three 

sectors. She said that in June 2021, the Council issued a statement regarding the structural 
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vulnerabilities of money market funds. She noted that the statement called for reforms to 

improve the resilience and functioning of short-term funding markets. She stated that the 

Council expressed support for the SEC’s engagement on this issue. She noted her support for the 

SEC’s vote on December 15, 2021 to propose amendments to certain rules that govern money 

market funds, and said the Council would continue to monitor this effort. She stated that, in

addition, the Council’s working groups on open-end funds and on hedge funds were assessing 

the risks posed by these types of funds and would evaluate whether actions were necessary to 

address their vulnerabilities. 

The Chairperson said the second priority was the resilience of the U.S. Treasury market. She 

noted that the Treasury market is the deepest and most liquid market in the world. She said that 

it was important to understand the disruptions that had occurred in that market because of its 

critical importance to the financial system. She noted that the annual report reviewed the 

progress of the Inter-Agency Working Group on Treasury Market Surveillance, which had 

worked with the Council to study the events of March 2020 and potential links between these 

events and other recent episodes. She said that the interagency working group was analyzing 

ways to improve the resilience of the Treasury market. She said that the working group was 

analyzing potential policies to improve data quality and availability, bolster the resilience of 

market intermediation, evaluate expanded central clearing, and enhance trading venue 

transparency and oversight.

The Chairperson stated that the annual report also discussed the Council’s work regarding 

climate-related financial risks, which was the third priority she spoke of in March. She said that 

the Council must look forward, based on its responsibility under the Dodd-Frank Act, which 

gave the Council the duty to respond to emerging threats to the stability of the U.S. financial 

system. She stated that with this purpose in mind, the Council issued a report on climate-related 

financial risk in October, which made recommendations to promote the resilience of the financial 

system. She said that these steps included expanding capacity, improving data and measurement

tools, enhancing disclosure of climate-related risk, assessing the scale of potential vulnerabilities, 

and adjusting regulatory and supervisory tools. She said that to help coordinate the Council’s 

efforts on these issues, the climate report called for the Council to establish a new staff-level 

committee, the Climate-related Financial Risk Committee. She noted that the Council would 

vote on establishing the committee later in the meeting. 

The Chairperson stated that climate was not the only emerging risk. She said that, as the annual 

report detailed, risks to U.S. financial stability were elevated compared to before the pandemic, 

even as the financial vulnerabilities of banks and central counterparties were low. She noted 

that, for instance, the report discussed potential shocks related to the elevated level of uncertainty 

characterizing the global growth outlook. She said the report also discussed vulnerabilities 

related to elevated asset prices.

The Chairperson stated that the report highlighted the critical importance of regulatory attention 

and coordination regarding stablecoins and other crypto assets, as the market for these assets 

continues to rapidly grow and evolve. She said that cybersecurity also remained a high priority, 

as did the LIBOR transition. She concluded her remarks by stating that she anticipated engaging 

with the Council in 2022 on these issues and others discussed in the annual report.
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The Chairperson then introduced Sandra Lee, Deputy Assistant Secretary for the Council, to 

provide an overview of the report’s findings and recommendations. She noted that Jonathan 

Rose, Senior Economist at the Federal Reserve Bank of Chicago, and Alexandra Somers, Senior 

Policy Advisor in the Office of the Financial Stability Oversight Council at Treasury, were 

available for questions.

Ms. Lee stated that this year’s annual report was once again the product of extensive 

collaboration among all of the Council members and member agencies. She said the report 

brought together a number of interagency workstreams, including on climate-related financial 

risk, Treasury market resilience, nonbank financial institutions, and stablecoins. She noted that 

each of these workstreams involved extensive collaboration.

Ms. Lee said that in the annual report, the Council reports to Congress each year on certain 

subjects, including the activities of the Council, significant financial market and regulatory 

developments, and potential emerging threats to U.S. financial stability. She noted that the 

Council also makes recommendations in the report to enhance U.S. financial markets, promote 

market discipline, and maintain investor confidence. 

Ms. Lee noted that this year’s report was completed a year and a half after the onset of the 

COVID-19 pandemic. She said that the report noted that the U.S. economy had continued to 

rebound from disruptions related to the pandemic. She said the recovery had been supported by 

monetary and fiscal policy, substantial progress in vaccinations, and broadly accommodative

financing conditions. She said the report also analyzed certain key economic developments that 

accompanied this recovery, including the growth of asset valuation pressures in residential 

housing and in other markets, as well as supply chain challenges and tightness in labor markets. 

She then highlighted some of the potential emerging threats and related recommendations in the 

report. 

The first topic Ms. Lee highlighted was climate change. She said that this was the Council’s first 

annual report that identified climate change as an emerging threat to U.S. financial stability. She 

said the report detailed the Council’s work leading up to the publication of the Council’s report 

on climate-related financial risk in October 2021. She stated that the annual report noted the 

importance of taking prompt action to improve the availability of data and measurement tools, 

enhance assessments of climate-related financial risks and vulnerabilities, and incorporate 

climate-related risks into risk-management practices and supervisory expectations for regulated 

entities. She said that the report also recommended that financial regulators should promote 

consistent, comparable and decision-useful disclosures that allow investors and financial 

institutions to take climate-related financial risks into account in their investment and lending 

decisions. 

The second topic Ms. Lee addressed was the transition from LIBOR. She said that after years of 

planning and preparation, the transition away from LIBOR was entering a critical stage. She 

noted that the report discussed certain risks related to this transition: the selection of new 

reference rates, the possibility of continued issuance of instruments that create or extend LIBOR

exposure, and legacy contracts without robust fallback provisions in the event of LIBOR
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cessation. She stated that the report emphasized that market participants should act with urgency 

to address their existing LIBOR exposures and transition to robust and sustainable alternative 

rates. 

The third topic Ms. Lee highlighted was digital assets. She said the report detailed several risks 

related to digital assets, including high price volatility due to speculative activity; the possibility 

of operational failures, fraud, and market manipulation; risks stemming from direct or indirect 

connections with banking services, financial markets, and financial intermediaries; illicit 

financing; national security; cybersecurity; privacy; and international monetary and payment 

systems integrity. She noted that the report analyzed stablecoins in detail, and summarized the 

report on stablecoins published in November 2021 by the President’s Working Group on 

Financial Markets (PWG), the FDIC and the OCC. She said the annual report recommended that 

federal and state regulators continue to examine risks to the financial system posed by new and 

emerging uses of digital assets and coordinate to address potential risks that arise from those 

digital assets. She stated that the annual report noted that the Council would further assess and 

monitor the potential risks of stablecoins and recommended that its members consider 

appropriate action to address those risks, while continuing to coordinate and collaborate on 

issues of common concern. She said the report noted that the Council would also be prepared to 

consider steps available to it to address risks outlined in the PWG report in the event 

comprehensive legislation is not enacted. 

The fourth issue Ms. Lee highlighted was cybersecurity risk. She stated that the report noted that 

the financial sector, like other critical sectors, is vulnerable to a cybersecurity incident. She said 

that the report also noted that the implementation of teleworking strategies could increase 

cybersecurity vulnerabilities. She said the report contained a number of recommendations, 

including that federal and state agencies continue to monitor cybersecurity risks and conduct 

cybersecurity examinations of financial institutions and financial infrastructure to ensure, among 

other things, robust and comprehensive cybersecurity monitoring, especially in light of new risks 

posed by the pandemic, ransomware incidents, and supply-chain attacks.

The fifth and final issue Ms. Lee highlighted was the global growth outlook. She stated that the

report noted that this outlook was characterized by elevated uncertainty, with the potential for 

continued volatility and unevenness of growth across countries and sectors. She said that risks 

included the possibility of higher-than-expected inflation; the possibility that financial 

vulnerabilities in China could lead to a hard landing; and the possibility that the pandemic could 

continue to cause volatility in economic activity. She stated that the report recommended that 

member agencies seek to ensure that the financial institutions they oversee are attentive to the 

risks posed by uneven or volatile global growth. She said that, in conclusion, the annual report 

provided an overview of the Council’s identification of potential risks or vulnerabilities on these 

five subjects and other areas. She noted that the report highlighted key actions taken and made

recommendations for addressing these risks.

Following Ms. Lee’s remarks, the Chairperson called on other Council members to comment on 

the annual report. 
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Jerome Powell, Chair of the Federal Reserve, noted that each year the Council collaborated to 

identify emerging threats to U.S. financial stability and make recommendations to address them. 

He expressed his support for this year’s annual report, and said that it built on a detailed review 

of risks by describing progress in the three priority areas identified by the Chairperson. He said 

that in each area, the annual report documented progress made in assessing the issue and in 

identifying steps that the Council and its member agencies could take to reduce systemic risks. 

Chair Powell concluded by stating that 2021 had been another year of unique challenges, but also 

of notable productivity and focus, and said that the annual report reflected the cooperation and 

coordination of the Council member agencies.

Jelena McWilliams, Chairman of the FDIC, stated that following significant economic turmoil in 

2020, the banking system remained resilient. She said that in contrast to the financial crisis of 

2008, only three banks had failed since the start of the pandemic in March 2020, and none had 

failed due to the pandemic or the ensuing economic stress. She noted that, at the same time, 

banks across the country had accommodated significant growth in deposits. Chairman 

McWilliams said that in 2021, the banking sector remained a source of strength for the economy, 

reinforced by banks’ strong capital positions. She noted that banks remained strongly capitalized 

in the third quarter of 2021, holding a higher amount and quality of capital than just prior to the 

financial crisis. She stated that while these were signs to be cautiously optimistic, the FDIC 

would nonetheless continue to monitor economic trends, deposit trends, and other factors that 

affect the health of the banking sector. She said that in particular, the FDIC remained vigilant 

about the potential effects of inflation on banks and their customers, the potential economic 

impact of the Omicron variant, and the evolution of certain markets post-pandemic, including 

commercial real estate.

Gary Gensler, Chair of the SEC, expressed his support for the report and stated that he had asked 

SEC staff to address a number of the points raised in the report and make recommendations to 

the SEC for proposals on several projects. He noted that the SEC’s vote on December 15, 2021 

proposing amendments to rules that govern money market funds was one example. He said that 

the annual report reflected new insights that the SEC had developed regarding money market 

funds and open-end bond funds. He stated that the SEC would incorporate economic analysis 

and public feedback when examining Treasury market resiliency, stock market resiliency, and 

other projects to shorten settlement cycles, in addition to interagency work on crypto-assets. He 

said that while the crypto-asset class was not the largest asset class, it was largely operating 

outside of the remit of the banking and market regulators. Chair Gensler said that Council 

member agencies should continue to evaluate how to address potential growing instability in

crypto markets within the agencies’ jurisdictions and authorities. He stated that the SEC was 

also working on consistent, comparable and decision-useful climate risk disclosures. Finally, he

stressed the importance of the LIBOR transition. He expressed his concern that some parts of 

the market might rely on a replacement rate for LIBOR that could prove inadequate in the event 

of market stress. He stated that the Bloomberg Short-Term Bank Yield Index (BSBY) rate had 

infirmities and would not stand the test of time or be conducive to financial stability.

Rostin Behnam, Acting Chairman of the CFTC, expressed his support for the report. He stated 

that derivatives markets continued to experience substantial volatility and, at times, turbulence 

driven by a multitude of factors. He said that weather impacts, supply-side constraints, and 
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fluctuating demand levels in the past few years had moved markets in unprecedented ways. 

After briefly summarizing the CFTC’s jurisdiction, he noted that overall risk levels remained

elevated and continued to receive monitoring and attention by the CFTC. He welcomed the 

focus in the annual report on the LIBOR transition, climate-related financial risks, and 

stablecoins, areas which he indicated would continue to be focuses for the CFTC.

Rohit Chopra, Director of the CFPB, expressed his support for the report, and stated that its 

release provided an opportunity for the CFPB to look ahead and chart its priorities for 2022. He 

said that the CFPB and other Council member agencies were evaluating the consumer protection 

implications of the entry of large technology platforms into financial services. He stated that 

these companies understand that surveillance of transaction activity can be used to monetize their 

broader business model, and he noted that this trend raised questions and concerns about 

consumers and data and also about the separation of banking and commerce. He said that given 

their large user bases, network effects, and access to troves of data, these firms could rapidly 

scale their financial services activities, potentially posing underappreciated risks to financial 

stability. Director Chopra stated that these firms could become dominant financial services 

providers almost overnight, and he recommended that Council member agencies assess the 

implications of this potential development. He said that his immediate concern was the financial 

system’s increased reliance on three cloud services providers. Director Chopra stated that

operational disruptions at these providers could paralyze communications in web platforms. He 

said that if operational issues were to impact the core services that banks and other institutions 

provide, it could undermine confidence in the financial system. He noted that the risks posed by 

concentration in cloud services have implications for nearly every sector of the economy. He 

stated that, as noted in the annual report, the Council supported the efforts of the Financial and 

Banking Information Infrastructure Committee (FBIIC) Technology Working Group on this 

topic. He said that it was worthwhile to evaluate risks specific to financial markets and U.S. 

financial stability to determine whether any of the Council’s tools should be deployed to mitigate 

them.

Sandra Thompson, Acting Director of the FHFA, stated that the annual report’s identification of 

climate-related financial risk as an emerging threat to U.S. financial stability was important to 

implementing the Council’s recommendations in its climate report. She said that the FHFA was 

committed to improving public awareness of climate risks, particularly those related to the 

housing sector, and would work with other Council member agencies on this issue. Acting 

Director Thompson also welcomed the discussion in the annual report on the efforts by FHFA

and its regulated entities to provide relief to borrowers and renters affected by the pandemic, as 

well as FHFA’s efforts to expand affordable and sustainable housing. She said that improving 

housing affordability in a sustainable manner remained a key priority for FHFA. She also 

welcomed the recommendation in the annual report that FHFA and the NCUA be granted 

examination and enforcement authority to oversee third-party service providers. She stated that

there was a continued discrepancy in authority among financial regulators in this area that should

be addressed. She said that examination and enforcement authority over third-party service 

providers was an important tool to help FHFA ensure the safety and soundness of FHFA’s

regulated entities.
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Todd Harper, Chairman of the NCUA, expressed his support for the report, including the 

Council’s recommendation to Congress that the NCUA have examination and enforcement 

authority over third-party service providers. He stated that this authority was especially needed 

now. He said that in October 2021, the NCUA board, without his support, had adopted a final 

rule to expand the permissible activities and services of credit union service organizations. He 

noted that while he voted against this rule, it had been issued by the NCUA. He expressed 

concern that the credit union system would be vulnerable to new risks. He said that this issue 

presented a regulatory blind spot that had widened and should be addressed. 

Thomas Workman, the Council’s independent member with insurance expertise, expressed his

support for the report’s statement encouraging pension regulators and the Financial Accounting 

Standards Board to improve the quality, timeliness, and depth of disclosures of pension financial 

statements and portfolio holdings.

Dino Falaschetti, Director of the OFR, stated that OFR was supporting several efforts outlined in 

the report, including recommendations related to climate-related financial risk, short-term 

wholesale funding, and central counterparties. He said that the OFR would continue to monitor, 

analyze and share information with other Council member agencies.

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

Securities Division, stated that the pandemic had presented novel issues in retail markets, 

consumer finance, and asset valuation. She stated that the work of the Council and its member

agencies had helped to protect investors and maintain orderly and efficient markets. She 

expressed her intent to continue working collaboratively on the issues highlighted in the report, 

including climate-related risks, digital assets, and cybersecurity concerns. 

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

2021 annual report: 

WHEREAS, the Financial Stability Oversight Council (Council) under section 112 of the DoddFrank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act) is required to 

annually report to and testify before Congress on: (1) the activities of the Council; (2) significant 

financial market and regulatory developments, including insurance and accounting regulations 

and standards, along with an assessment of those developments on the stability of the financial 

system; (3) potential emerging threats to the financial stability of the United States; (4) all 

determinations made under section 113 or title VIII of the Dodd-Frank Act, and the basis for 

such determinations; (5) all recommendations made under section 119 of the Dodd-Frank Act 

and the result of such recommendations; and (6) recommendations to (a) enhance the integrity, 

efficiency, competitiveness, and stability of U.S. financial markets; (b) promote market 

discipline; and (c) maintain investor confidence; and

WHEREAS, the staffs of the Council members and their agencies prepared the attached 2021 

annual report of the Council (2021 Annual Report) pursuant to section 112 of the Dodd-Frank 

Act, and members of the Council have reviewed and commented on the attached report.
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NOW, THEREFORE, BE IT RESOLVED, that the Council hereby approves the 2021 Annual 

Report and authorizes the Chairperson, or her designee, to take such action as they may deem 

necessary or appropriate to transmit the 2021 Annual Report to Congress and to release it to the 

public; 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 2021 

Annual Report and to take such other actions as they may deem necessary or appropriate to 

prepare the report for transmittal to Congress and release to the public.

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 Committee

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

Financial Risk Committee (CFRC). She introduced Sandra Lee, Deputy Assistant Secretary for 

the Council at Treasury, to provide an overview of the proposed committee.

Ms. Lee stated that the Council’s report on climate-related financial risk, which the Council 

published in October, stated that the Council would establish the CFRC within 60 days. She said 

that the proposed committee charter would establish the CFRC and formalize its purposes, 

duties, and operating structure. She stated that the CFRC would play a central role in 

interagency collaboration, to identify, assess and mitigate climate-related risks to the financial 

system. She said that through this committee, staff from across the Council members and 

member agencies would meet and share information, as they work to implement the 

recommendations in the Council’s climate report. 

Ms. Lee stated that the proposed structure of the CFRC was similar to the charters of the other 

five Council staff-level committees that the Council adopted in 2015. She said that, based on the 

Council’s experience with those existing committees, the Council would expect the CFRC to 

leverage each Council member agency’s expertise, and promote shared responsibilities among 

the member agencies. She noted that the proposed committee charter set forth the duties of the 

CFRC, based on the needs identified in the Council climate report. She said that these duties 

included identifying priority areas for assessing and mitigating climate-related risks to the 

financial system, facilitating information sharing in coordination among staff of Council 

members and member agencies relating to climate-related risks to the financial system, 

coordinating efforts among Council members and member agencies to address data gaps and to 

develop data standards regarding climate-related risks to the financial system, and providing 

updates to the Council at least semiannually on the status of efforts by staff of Council members 

and member agencies to identify and address climate-related financial risks.

She stated that the CFRC would also be responsible for overseeing the Council’s climate-related

financial risk advisory committee, which staff were currently working to establish. She said that 

this advisory committee would provide the Council with input on climate-related financial risks 

from a broad array of stakeholders. She concluded by stating that staff recommended that the 
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Council vote to establish the CFRC and adopt the proposed charter, which would then be posted 

on the Council’s website.

The Chairperson then noted that when the Council issued the report on climate-related financial 

risk in October 2021, she stated that the report was a first step, not the Council’s final word. She 

noted that the vote on the proposed CFRC charter represented another step forward, and the 

CFRC would help Council member agencies collaborate on the recommendations they agreed to 

in the Council’s climate report. She stated that addressing climate-related financial risks was an 

urgent priority that would require collective effort.

The Chairperson called on other Council members to comment on the CFRC. 

Michael Hsu, Acting Comptroller of the Currency, stated that he supported the Council’s vote to 

create the CFRC. He said that the CFRC would play an important role in identifying priority 

areas for assessing and mitigating climate-related risks to the financial system, coordinating 

information sharing, aiding in the development of common approaches and standards, and 

facilitating communications across Council members and interested parties. He stated that 

addressing climate-related risks to the financial system required the collaboration of multiple 

parties and partnerships, using many strategies and mechanisms. He also noted that, consistent 

with the OCC’s safety and soundness mandate and the recommendations of the Council in the 

climate report, the OCC issued for public feedback draft principles for climate-related financial 

risk management for large banks on December 16, 2021. He said the OCC was hopeful that the 

principles would promote and accelerate improvements in banks’ climate risk management 

practices.

Chair Powell stated that the Federal Reserve looked forward to reviewing comments on the draft 

principles the OCC released on December 16, as banking regulators continued to formulate an

interagency set of supervisory expectations for the management of climate-related financial risks, 

with a focus on large banks. He said that a consistent approach across bank regulatory agencies 

would best support the effective management of these risks. He stated that the CFRC would help 

all of the financial regulatory agencies share information and findings on climate-related

financial risk. He stated that the Federal Reserve was committed to ensuring that these 

supervised firms have strong risk management capabilities to promote their resilience to all risks, 

including climate-related financial risks.

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

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 Committee (CFRC) within 60 days of the publication of the report; and
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WHEREAS, the staffs of the Council members and their agencies have prepared the attached 

charter for the CFRC (CFRC Charter); and

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

approve and adopt the CFRC Charter.

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

CFRC Charter; and

BE IT FURTHER RESOLVED, that the Council hereby authorizes the CFRC 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 

CFRC 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.

3. LIBOR Transition

The Chairperson then turned to the next agenda item, an update on the LIBOR transition. She 

introduced Michael Gibson, Director of the Division of Supervision and Regulation at the 

Federal Reserve. 

Mr. Gibson stated that as a result of collective efforts on the LIBOR transition, a nearly decadelong effort involving market participants and regulators from around the world, U.S. and global 

financial markets were now stronger and more resilient. He said that trillions of dollars in 

financial contracts now rested upon reference rates that were transparent, well-designed, wellmanaged and grounded in market transactions. He said that the efforts of the Alternative 

Reference Rates Committee (ARRC), the private-sector group leading the transition in the 

United States, had largely addressed the key risks presented by LIBOR: that it was based on 

fragile and thinly traded markets, was subject to manipulation, and often relied on judgments

rather than market transactions.

Mr. Gibson stated that the ARRC recommended the Secured Overnight Financing Rate (SOFR) 

as its preferred rate, because it is transparent and resilient, resting on one of the deepest and most 

liquid markets in the world. He said that the Federal Reserve, along with its fellow supervisors, 

had told banks that entering new LIBOR contracts after December 31, 2021 would create safety 

and soundness risks and that the Federal Reserve would supervise firms accordingly. He said 

that with this date approaching in two weeks, the Federal Reserve was encouraged by the 

progress it had seen in markets.
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He stated that open interest in linear swaps referencing SOFR had increased sevenfold from just 

under $1 trillion in September 2020 to over $7 trillion in November 2021. He said that crosscurrency swaps between the U.S. dollar and other major currencies had almost completely 

transitioned to SOFR and other risk-free reference rates. He noted that 90 percent of recent 

floating-rate note issuance had been linked to SOFR and all newly issued floating-rate agency 

mortgage-backed securities were based on SOFR. He said that while the loan market had been

slow to transition to alternative rates, firms were reporting that a majority of new business loans 

in the fourth quarter 2021 had been utilizing alternative rates, primarily SOFR.

Mr. Gibson said that over the next year, the Federal Reserve would be expecting a decline in 

outstanding LIBOR exposures, as firms stop entering into new LIBOR contracts and existing 

LIBOR contracts mature. He said that although the Federal Reserve’s supervisory guidance 

directly impacts banking organizations, other market participants should also prepare for the end 

of LIBOR. He stated that liquidity in U.S. dollar LIBOR instruments would likely fall during 

2022. He said that all market participants should transition soon to alternative reference rates.

Mr. Gibson then turned to transition planning for existing, or so-called “legacy,” LIBOR

contracts. He said that there were currently more than $200 trillion of legacy LIBOR contracts. 

He noted that to assist with the transition of these contracts, U.S. dollar LIBOR would be 

available in most tenors through June 2023. He said that the ARRC estimated that this would

allow approximately two-thirds of legacy contracts to mature according to their original terms. 

He said that some legacy LIBOR contracts nevertheless would mature after June 2023. He noted 

that many of these contracts would fall back to alternative reference rates, but some contracts did

not include workable fallback language. He said that while a small number of states had enacted 

legislation to allow the “tough legacy” contracts governed by these states’ laws to transition to

SOFR-based rates, federal legislation would establish a clear and uniform solution on a 

nationwide basis. He stated, in conclusion, that the transition away from LIBOR was advanced 

and accelerating, and that the financial system would be more stable as a result.

The Chairperson stated that since the Council last discussed this topic, the market had made 

considerable progress in the transition away from LIBOR. She said that the share of new 

issuance and secondary market activity tied to LIBOR continued to decline. She noted that the

pace of transition to more durable rates, like SOFR, had accelerated in the past few months. She 

said that the CFTC-sponsored “SOFR First” initiative had been helpful at driving the transition

in interdealer markets. She also noted that the ARRC’s formal recommendation of a term SOFR 

rate had helped contribute to a recent uptake in SOFR for business loans. She said that despite 

this progress, more work remained to be done. She said that with only two weeks remaining 

before two year-end LIBOR deadlines, it was important that market participants continue to 

prepare for the cessation of several LIBOR currency-tenor pairs, and also ensure that they are

ready to meet supervisors’ expectations regarding new LIBOR exposures. She said that more 

progress was also needed on the transition to more durable exchange-traded derivatives. Finally, 

she stated that she had encouraged Congress to adopt legislation to facilitate a smooth transition 

from LIBOR and eliminate potential uncertainty.

The Chairperson then called on other Council members to comment on the LIBOR transition. 
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Chair Powell noted that supervisory guidance stated that LIBOR would not be available after 

December 31, 2021. He stated that the transition was a complex and ongoing process that had 

been underway for more than a decade, and was making progress. He said that the Federal 

Reserve welcomed supporting legislation to help facilitate the smooth transition from LIBOR.

Chairman McWilliams stated that the FDIC remained focused on the LIBOR transition. She said 

that FDIC-supervised institutions continued to move in the right direction to address the LIBOR 

transition and adopt a replacement rate by December 31. She said that banks were also 

addressing the challenges of legacy contracts and making adequate preparations for LIBOR’s 

discontinuation. She stated that the FDIC had not noted significant outliers among FDICsupervised institutions. Chairman McWilliams stated that the FDIC had found that many FDICsupervised institutions, particularly smaller community banks, did not have material LIBOR 

exposures. She said that institutions that did have such exposures generally had made concerted 

efforts to transition away from LIBOR and were on track to issue new contracts in another 

reference rate by year-end. She stated that for several years, the FDIC had conducted industry 

outreach on the LIBOR transition to encourage the identification of exposures, timely 

implementation of a replacement rate, and amendments to legacy contracts. She said that the 

FDIC also participated in the issuance of several interagency statements emphasizing 

supervisory expectations, most recently in October 2021. Chairman McWilliams stated that the 

FDIC would continue to monitor the LIBOR transition during safety and soundness 

examinations in 2022 to ensure that a replacement rate had been implemented for new contracts

and that legacy contracts were being appropriately addressed.

Acting Chairman Behnam stated that the CFTC had worked closely with the ARRC and the 

Federal Reserve Bank of New York on the LIBOR transition. He said that the most critical step 

in the transition involved exchange-traded derivatives, principally the Eurodollar contract, which 

moves based on LIBOR. He said that the CFTC had established a guide for this final phase. He 

stated that the main message of the guide was that all market participants should ensure 

operational capability to transact in SOFR exchange-traded derivatives as soon as possible. He 

said that all market participants were also encouraged to adopt the best practice of replacing the 

use of LIBOR with SOFR in new contracts, including exchange-traded derivatives, after yearend 2021. He stated that bank and nonbank market participants alike should promptly transition

away from LIBOR. He noted that the transition of exchange-traded contracts would be the last 

but most significant step in the LIBOR transition.

Chairman Harper stated that through the Federal Financial Institutions Examination Council, the 

NCUA had maintained clear, coordinated and consistent messaging to its regulated entities. He 

stated that the NCUA would continue to ensure that its regulated entities make use of new and 

appropriate reference rates that are both transparent and reliable. He noted that the NCUA also 

sought to ensure that new contracts have robust fallback language. He concluded by expressing 

his support for the ongoing LIBOR transition. 

Chair Gensler stated that he supported changes to the Trust Indenture Act, which the SEC 

administers, to help facilitate the LIBOR transition. He expressed his support for the transition 

to SOFR and stated his opposition to transitioning to rates that he said are frail and rely on 

commercial paper and certificates of deposit, such as BSBY. He said that he did not believe that 
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BSBY was compliant with the principles laid out in the Principles for Financial Benchmarks 

published in 2013 by the International Organization of Securities Commissions.

Director Chopra stated that he wanted to provide comments about consumer loans. He noted that 

on December 7, 2021, the CFPB finalized a rule facilitating the transition away from LIBOR for 

consumer financial products. He said that the rule established requirements for how creditors 

should select replacement indices for existing LIBOR-linked consumer loans after April 2022. 

He said that no new financial contracts may reference LIBOR as the relevant index after the end 

of 2021. He said that starting in June 2023, LIBOR could no longer be used for existing 

financial contracts in consumer loans. He noted that approximately $1.4 trillion in consumer 

loans are tied to LIBOR. He said that in most circumstances, lenders can replace the LIBOR

index with new indices based on SOFR or the prime rate. He expressed his support for this 

approach and stated that it would be less vulnerable to the problems underlying the use of 

LIBOR.

4. Resolution Approving the Minutes of the Meeting Held on November 15, 2021 

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

attached hereto of the meeting held on November 15, 2021 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 11:55 A.M.