1 

Minutes of the Financial Stability Oversight Council

Held April 18, 2016 

PRESENT: 

Jacob J. Lew, Secretary of the Treasury and Chairperson of the Financial Stability Oversight 

Council (Council) 

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

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

Mary Jo White, Chair, Securities and Exchange Commission (SEC) 

Timothy Massad, Chairman, Commodity Futures Trading Commission (CFTC) 

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

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

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

Debbie Matz, Chairman, National Credit Union Administration (NCUA) 

Roy Woodall, Independent Member with Insurance Expertise 

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

(nonvoting member) (via telephone) 

Michael McRaith, Director, Federal Insurance Office, Department of the Treasury (non-voting 

member) 

John P. Ducrest, Commissioner, Louisiana Office of Financial Institutions (non-voting member) 

Adam Hamm, Commissioner, North Dakota Insurance Department (non-voting member) 

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

Division (non-voting member)

GUESTS: 

Department of the Treasury (Treasury)

Sarah Bloom Raskin, Deputy Secretary of the Treasury 

Antonio Weiss, Counselor to the Secretary 

Patrick Pinschmidt, Deputy Assistant Secretary and Executive Director of the Council 

Mark Kaufman, Counselor to the Deputy Secretary

Eric Froman, Deputy Assistant General Counsel for the Council 

Board of Governors of the Federal Reserve System

Daniel Tarullo, Governor 

Nellie Liang, Director, Office of Financial Stability Policy and Research

Federal Deposit Insurance Corporation 

Jason Cave, Special Advisor to the Chairman for Supervisory Matters 

Securities and Exchange Commission

Nathaniel Stankard, Deputy Chief of Staff 
2 

Commodity Futures Trading Commission

Lawranne Stewart, Special Counsel

Consumer Financial Protection Bureau

Ron Borzekowski, Assistant Director for Research 

Federal Housing Finance Agency 

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

Comptroller of the Currency 

Jennifer Kelly, Senior Deputy Comptroller for Bank Supervision Policy and Chief National Bank 

Examiner

National Credit Union Administration

Ralph Monaco, Chief Economist 

Office of the Independent Member with Insurance Expertise

Diane Fraser, Senior Policy Advisor 

Federal Reserve Bank of New York

William Dudley, President and Chief Executive Officer

Office of Financial Research

Stacey Schreft, Deputy Director for Research and Analysis

Federal Insurance Office

Steven Seitz, Deputy Director (Financial Stability)

Louisiana Office of Financial Institutions

Margaret Liu, Senior Vice President & Deputy General Counsel, Conference of State Bank 

Supervisors 

North Dakota Insurance Department

Mark Sagat, Counsel and Manager, Financial Policy and Legislation, National Association of 

Insurance Commissioners 

Maryland Office of the Attorney General, Securities Division

Christopher Staley, Counsel, North American Securities Administrators Association

PRESENTERS:

Annual Report 

• Trent Reasons, Director of Analysis, Treasury 

• Erik Heitfield, Assistant Director, Research and Statistics, Federal Reserve 

Update on Review of Asset Management Products and Activities 
3 

• Patrick Pinschmidt, Deputy Assistant Secretary and Executive Director of the Council, 

Treasury

• Charles Cohen, Deputy Director of Analysis, Treasury (available for questions) 

• Lyndsay Huot, Deputy Director of Policy, Treasury (available for questions) 

Executive Session

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

approximately 4:32 P.M. (EDT). He outlined the meeting agenda, which had previously been 

distributed to the members together with copies of the resolutions and other materials. The 

agenda for the executive session of the meeting included the Council’s 2016 annual report. 

The Chairperson began by acknowledging that this was the last Council meeting for the 

Chairman of the NCUA, Debbie Matz, and he thanked her for her service. 

The Chairperson then noted the decision, issued March 30, 2016, of the U.S. district court for the 

District of Columbia rescinding the Council’s final determination regarding MetLife, Inc. under 

section 113 of the Dodd-Frank Wall Street Reform and Consumer Protection Act. The 

Chairperson noted that the government was appealing the decision, which he said misinterprets 

the Council’s interpretive guidance. 

 1. 2016 Annual Report 

The Chairperson then introduced the first agenda item, the Council’s 2016 annual report to 

Congress. The Chairperson introduced Trent Reasons, Director of Analysis at Treasury, and 

Erik Heitfield, Assistant Director for Research and Statistics at the Federal Reserve. Mr. 

Reasons provided an update on the status of the drafting of the annual report, and noted that the 

draft report remained under review by staff of Council members and member agencies. 

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

presentation of certain risks in the report. 

 2. Other Business 

The Chairperson then noted that the Council would be voting during the open session of the 

meeting on the Council’s public update regarding asset management products and activities. He 

thanked the Council members for their work on the update. He also noted that the Council’s 

assessment of certain potential risks arising from asset management products and activities 

would benefit from additional information and analysis, and called upon Council member 

agencies to participate in the ongoing analysis.

The Chairperson then called on Antonio Weiss, Counselor to the Secretary at Treasury, to 

provide an update on Puerto Rico. Mr. Weiss noted that Puerto Rico began defaulting on certain 

of its obligations in December 2015 and that the next large payment, by the Government 

Development Bank, was due on May 2. He explained that Treasury was working with Congress 

on a legislative solution to Puerto Rico’s difficulties. The Chairperson noted that the situation in 

Puerto Rico is dire. 
4 

The Chairperson adjourned the executive session of the meeting at approximately 4:50 P.M. 

(EDT).

Open Session

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

5:00 P.M. (EDT). The agenda for the open session included: (1) an update on the Council’s 

review of asset management products and activities; and (2) consideration of, and a vote on, 

resolutions approving the minutes of the Council’s meetings on March 2, 2016, and March 21, 

2016. 

 1. Update on Review of Asset Management Products and Activities 

The Chairperson introduced the first agenda item, an update on the review of potential risks to 

financial stability arising from asset management products and activities. He noted that the 

Council’s work on asset management underscores the importance of the Council’s mission. The 

Chairperson noted that the Council’s most fundamental duty is to monitor potential risks and 

emerging threats to financial stability, and he stated that this work only can be achieved by 

bringing the entire regulatory community together. He noted that, before the financial crisis, no

single entity had this responsibility, and excessive risks grew within regulatory gaps and across 

markets. He said that the Council was created to give its members the collective responsibility to 

address emerging risks before they threaten the financial system and damage the economy. 

The Chairperson said that the Council did not begin its work with pre-determined outcomes but 

with a recognition that the asset management industry is a significant and growing segment of 

the U.S. financial system. He said that the Council has a responsibility to understand the 

potential implications for financial stability as markets evolve. He noted that the Council has 

focused on issues and questions that are being studied by market participants, academic experts, 

and other market observers as they seek to understand and manage risk in a changing world. He 

also noted that the Council has an interest in well-functioning markets that promote stable 

economic growth, particularly in times of stress. 

The Chairperson said that the update that the Council would vote on at this meeting is not a 

rulemaking but rather the Council’s collective view on key areas of potential risks. He explained 

that Council members have consulted and worked closely with each other and harnessed the 

extensive analytical resources of their expert staffs. He emphasized that the Council has 

conducted outreach to the asset management industry and market observers to inform its 

analysis, including holding a public conference and issuing a request for public comment.

The Chairperson noted that the Council benefited greatly from the expertise of many of its 

member agencies in this analysis, particularly the insights of Chair White and the SEC staff. He 

noted that the SEC is engaged in important rulemaking initiatives affecting the asset 

management industry in a number of the areas explored in the Council’s review, and that the 

Council welcomes these initiatives by the SEC. He said that it is important that the work of the 

Council and the work of the other regulators are complementary. 
5 

Finally, the Chairperson expressed the importance of the Council continuing to lead the 

international regulatory conversation in this area. He said that the Council’s work represents a 

domestic consensus on potential risks to financial stability from asset management products and 

activities.

The Chairperson then highlighted the two risk areas emphasized by the Council’s analysis—

liquidity and redemption risk, and risks related to leverage. He said that the Council’s analysis 

indicates that financial stability concerns may arise from liquidity and redemption risks in pooled 

investment vehicles, in particular in mutual funds, and that the Council has laid out a number of 

important policy steps that should be considered. He said that these are important steps to help 

regulators and investors better understand, monitor, and mitigate potential financial stability 

risks. 

With respect to leverage, the Chairperson said that the Council has not concluded that the use of 

leverage by private funds currently presents financial stability risks. He noted that, overall, the 

use of leverage in the financial system has decreased dramatically since the crisis and that 

leverage among hedge funds does not appear high on average, but that, by several measures, 

leverage appears to be concentrated in large funds. He said, however, that greater leverage does 

not necessarily imply greater risk, and many other factors need to be considered. He noted that 

individual regulators do not have a complete picture of the risks being taken. He stated that the

need for further analysis and information sharing is clear, and that the Council plans to create a 

working group composed of experts from the relevant Council member agencies to address the 

questions identified by the Council’s initial review.

The Chairperson then asked Patrick Pinschmidt, Deputy Assistant Secretary and Executive 

Director of the Council at Treasury, to discuss the details of the asset management update. Mr. 

Pinschmidt started by describing the Council’s work to date. He recounted how, in May 2014, 

the Council hosted a public conference on asset management that brought together a diverse 

group of industry and non-industry participants that helped shape the Council’s initial approach 

to its work. He said that after the conference, the Council undertook a more focused analysis of 

potential risks related to industry-wide products and activities across the asset management 

sector. He then noted that in December 2014, the Council issued a notice for public comment 

regarding a broad array of potential risks, as well as existing risk management practices. 

 

Mr. Pinschmidt said that the engagement with market participants and other stakeholders had 

contributed greatly to the Council’s work. He said that the Council’s focus has been on potential 

risks to financial stability, rather than investment risk, which is a normal and necessary part of 

market functioning. He explained that the Council has been focused on assessing whether asset 

management products or activities could create, amplify, or transmit risk more broadly in the 

financial system in ways that could affect U.S. financial stability.

 

Mr. Pinschmidt then outlined the five areas of the Council’s proposed public update on asset 

management products and activities: (1) liquidity and redemption; (2) leverage; (3) operational 

risks; (4) securities lending, and (5) resolvability and transition planning. He said that liquidity 

and redemption risk and leverage were the key areas of focus by the Council. 
6 

 

Mr. Pinschmidt said that, for each of the five areas, the Council had reviewed potential risks to 

financial stability and considered the materiality of such risks and potential mitigants, including 

the extent to which market practices or regulations may address the risks. He said that, 

throughout this process, the members of the Council had consulted extensively and had drawn on 

the expertise of their staffs and those of the member agencies and that the Council considered 

many sources of information, including publicly available data, data reported on the SEC’s Form 

PF, analyses from market participants, academic studies, and information submitted in response 

to the Council’s request for public comment. Mr. Pinschmidt also noted that the Council’s 

review recognized that the SEC had issued several proposed rules since May 2015 affecting the 

asset management industry. He said that, as the SEC rulemakings progress, the Council intends 

to monitor the effects of any regulatory changes and their implications for financial stability.

 

Mr. Pinschmidt then noted that the Council’s review of liquidity and redemption risk focused on 

pooled investment vehicles. He explained that there are two primary features of these 

investment vehicles—liquidity transformation and first-mover advantage—that may raise 

potential financial stability concerns, particularly during times of market stress. He then outlined 

the six steps that should be considered as ways to help mitigate these financial stability risks. 

First, robust liquidity risk management practices for mutual funds should mitigate the risks of 

potential deterioration in the liquidity of fund assets, particularly with regard to preparations for 

stressed conditions by funds that invest in less-liquid assets. Second, clear regulatory guidelines 

addressing limits on mutual funds’ ability to hold assets with very limited liquidity should be 

considered. Third, enhanced reporting and disclosures by mutual funds of their liquidity profiles 

and liquidity risk management practices would help mitigate financial stability risks. Fourth, 

taking steps to allow and facilitate mutual funds’ use of tools to allocate redemption costs more 

directly to investors who redeem shares should help reduce first-mover advantage and mitigate 

the risk that less-liquid asset classes would be faced with widespread sales under stressed 

conditions. Fifth, additional public disclosure and analysis of external sources of financing for 

mutual funds should be considered. Finally, regulators should consider whether these measures 

are appropriate for reducing potential liquidity risks in collective investment funds and similar 

pooled investment vehicles subject to their respective jurisdictions. 

 

Mr. Pinschmidt said that the next area the Council focused on was leverage, among both 

registered funds and private funds. He said that the Council’s primary focus was on private 

funds. He noted that, on average, the use of leverage by private funds is not particularly 

elevated, but that the use of leverage appears to be concentrated in larger funds. He said that 

fully evaluating these issues requires additional analyses, involving more and better data. 

 

He also noted that available measures of leverage are imperfect, and that the relationship 

between a hedge fund’s level of leverage and risk, and whether that risk may have financial 

stability implications, is highly complex. He said that differences in investment strategies, 

counterparties, asset classes, hedging, and financing terms all play a critical role in understanding 

hedge fund risks. He said that while hedge fund reporting on Form PF has increased 

transparency to regulators on the use of leverage, the data do not provide a complete picture of 

risk-taking. 

 
7 

Mr. Pinschmidt noted that hedge funds and their counterparties are supervised or regulated by 

multiple agencies with various jurisdictions, meaning that no single regulator has a complete 

window into the risk profile of funds, which limits the Council’s ability to assess potential risks 

to financial stability from these activities. He said that the Council is therefore creating an 

interagency working group that will share and analyze relevant regulatory information in order to 

better understand hedge fund activities and further assess whether there are potential risks to 

financial stability. He said that the working group will also assess the sufficiency and use of 

regulatory data to evaluate the extent and types of leverage employed by hedge funds and will 

consider potential enhancements to this data as well as the establishment of standards governing 

the measurements of leverage. Mr. Pinschmidt said that the working group will seek to provide 

findings to the Council by the fourth quarter of 2016. He explained that if risks to financial 

stability are identified, the Council intends to (1) determine what actions can be taken by 

regulators using existing authorities; (2) assess whether existing regulatory and supervisory tools 

are sufficient to address such risks, and (3) consider whether additional authorities may be 

needed for market regulators or other supervisory agencies. 

 

With respect to the other three areas of the Council’s analysis, Mr. Pinschmidt said that the 

review of operational risks focused on the potential for a disruption or failure of a service 

provider or the provision of a flawed service resulting in broader transmission of risk. He said 

that the Council believes further analysis is appropriate and will seek continued engagement with 

industry participants and other stakeholders to develop a greater understanding of service 

providers, their operating infrastructure, and the measures used by asset managers to mitigate 

these potential risks.

 

Mr. Pinschmidt said that with respect to securities lending, more comprehensive information on 

securities lending is necessary to assess potential risks. He stated that, in addition to encouraging 

a number of data enhancements, the Council encourages improved and regular data collection 

and reporting, interagency data sharing, and additional engagement with international 

counterparts.

 

With respect to resolvability and transition planning, Mr. Pinschmidt said that the Council 

identified certain potential risks and steps to address such risks in the context of its analysis of 

liquidity and redemption risks and leverage. He noted that SEC staff are developing a proposed 

rule for consideration by the SEC that would require registered investment advisers to create and 

maintain transition plans that address, among other things, a major disruption in their business. 

After the presentation, the Chairperson recognized other Council members who had comments. 

Mary Jo White, Chair of the SEC, expressed her support for the publication of the Council’s 

update and commended the transparency and the work of the staff that led to the update. Chair 

White stated that the Council’s work on this topic is complementary to the regulatory reforms the 

SEC is currently undertaking. She noted that the SEC has been the primary regulator of the vast 

majority of the asset management industry since 1940 and highlighted the SEC’s pending 

initiatives to modernize and enhance its asset management regulatory regime. She noted that 

SEC rule proposals regarding enhanced reporting of data, liquidity risk management, and use of 
8 

leverage are outstanding and that she expected proposals on transition planning and stress testing 

to follow. 

Chair White said that, although there is overlap in the topics covered in Council’s update and the 

SEC’s proposed reforms, it should be understood that the SEC’s analysis of asset management 

issues is set forth in the SEC’s proposals. She stated that the SEC, in developing final 

regulations, will consider and rely on its analysis of the input received from the public. She 

stated that the Council update should not be read as an indication of the direction that the SEC’s 

final asset management rules may take.

Chair White said that the Council views set forth in its public update describe certain relevant 

principles and next steps for consideration. She stated that the exercise had also highlighted 

other important issues not within the SEC’s jurisdiction, including the interaction of asset 

managers with other financial institutions, the use of economic substitutes across the industry, 

and the behavior of market participants before and after the financial crisis. She noted that 

careful examination of these and other issues by both the Council and relevant regulators is 

important for analyzing risks to financial stability and the materiality and likelihood of such 

risks. She commended the work of the staff and that stated that she looked forward to continued 

collaboration with her colleagues on the Council. 

The Chairperson then turned to Janet Yellen, Chair of the Federal Reserve. Chair Yellen began 

by stating that she supports the Council’s public update. She noted that in recent years the asset 

management industry has expanded its role in providing credit to the economy and that some 

products and activities have become more complex. She stated that the Council’s update 

highlights several areas where these developments could create risks to financial stability. She 

stated that an important risk pertains to funds that in recent years have developed a greater 

mismatch between the liquidity of the assets they hold and the liquidity offered to shareholders. 

She said that such mismatches increase the incentives for fund investors to redeem ahead of 

others. She stated her belief that the steps described in the Council’s update should be 

considered to reduce the mismatch and any first-mover advantage in order diminish the 

likelihood of broad market disruptions that could arise from sales of less-liquid assets by funds 

that are forced to meet large and widespread redemptions. 

Chair Yellen also observed that some registered funds have increased their use of leverage, 

including through derivatives, in ways that are not transparent. She noted that the SEC has taken 

several important steps related to liquidity risks and leverage, and that steps to improve reporting 

risk management practices are the foundation for any efforts to mitigate potential risks to 

financial stability. Chair Yellen stated that she supports the creation, under the Council’s public 

update, of an interagency working group to study private funds that appear to have significant 

leverage, stating that the group should seek to improve the systematic analysis of regulatory 

information that is collected by the agencies for different purposes and that the aim should be to 

better assess potential systemic risks from these funds. She added that as the asset management 

industry has grown, it is important for the Council to continue to evaluate potential risks to 

financial stability arising from increased reliance on a small number of service providers. She 

said that this effort highlights that as financial intermediation practices have expanded and 

become more interrelated, some practices that create risks do not fall within the scope of any 
9 

individual regulatory agency. She said that the Council is positioned to facilitate cross-industry 

efforts and a system-wide approach, which is important to identifying and mitigating emerging 

risks in the financial system. 

The Chairperson then turned to Martin Gruenberg, Chairperson of the FDIC. Chairperson 

Gruenberg Gruenberg said that he supported the issuance of the Council’s public update. He 

noted that the asset management industry has grown in size and importance in recent years, 

becoming more consequential to the financial markets and the broader economy. He said that, as 

of December 2014, U.S. pooled investment vehicles, excluding money market mutual funds, had 

approximately $25.8 trillion of assets. He said that to mitigate liquidity risks, mutual funds 

should consider adopting risk management practices that incorporate the impact of stress 

conditions on less-liquid assets. He also said that the establishment of regulatory guidelines 

establishing limits on less-liquid assets should be considered. 

Chairperson Gruenberg then said that the Council also focused on the potential risks to U.S. 

financial stability associated with leverage in certain investment vehicles. He said that one area 

that bears further analysis is the use of leverage by hedge funds. He said that the Council’s 

public update notes that many hedge funds use relatively small amounts of leverage but that 

large hedge funds tend to use more leverage than smaller funds. He said that he supports the 

creation of the Council’s interagency working group that will share and analyze regulatory 

information in order to assess potential risks to financial stability.

Timothy Massad, Chairman of the CFTC, then stated that he supports the issuance of the 

Council’s public update and thanked the staffs of the member agencies for their efforts. He

endorsed the update’s suggestion that the Council study further the use of leverage, particularly 

by hedge funds. He said that the issues raised by the update regarding leverage are particularly 

relevant to the work of the CFTC because of the role of derivatives, noting that, while the CFTC

does not regulate hedge funds, it is responsible, along with the SEC, for derivatives regulation. 

Chairman Massad said that the first challenge is in determining the metrics the Council should 

use to measure leverage. He said that, as the Council’s public update notes, no good metric for 

leverage in this context is available. He noted that the leverage metrics cited in the update may 

not indicate the levels of underlying risk. As an example, he described gross notional exposures, 

which include derivatives, but not in a manner that measures risk or that takes into account 

factors that affect risk, such as product type, offsetting positions, whether a transaction is cleared, 

and whether margin is collected. He said that to analyze the implications of leverage, the 

Council needs to take into consideration these and other critical market structure details. 

Chairman Massad said that the CFTC made a preliminary analysis of the data it collects to 

identify hedge funds with the largest derivatives exposures, finding that most of the exposure 

relates to cleared derivatives. He said that the funds generally had extremely low levels of 

uncleared derivatives and that the counterparties were typically large registered swap dealers

Chairman Massad also highlighted that the swaps marketplace is changing. He noted that the 

CFTC now requires clearing of most swaps and reporting of all swaps. He said that the CFTC is 

implementing margin requirements for uncleared swaps between swap dealers and large 

financial institutions and that trading on swap execution facilities is increasing. He said that 
10 

these steps have brought greater transparency to this market and a greater ability to address risk 

and that these and other regulatory reforms, taken together with other changes in the 

marketplace, may be contributing to increased derivative activity by hedge funds and other asset 

management firms.

Chairman Massad stated that the first step is to work with and improve the data the Council 

member agencies are now collecting to help transition from an emphasis on collecting historical 

data on past quarterly periods to something closer to real-time analysis of exposures across 

cleared and uncleared positions. He said that this will take time but that this is work is necessary 

to assess potential risk to the financial system.

The Chairperson then turned to Chairman Matz. Chairman Matz thanked the staff of the Council 

member agencies who have worked on this issue. She expressed her agreement with the 

statements of the other Council members. She said that the Council’s public update shows that

the Council has moved carefully, based on the comments of industry participants and academics

and the expertise of the Council members. She highlighted that there are still data gaps, and that, 

with respect to leverage, the Council has taken a serious but preliminary look at leverage in 

hedge funds and realized that it needs additional information. She noted that the Council’s 

creation of the hedge fund working group to collect all available regulatory data on hedge funds 

will assist in tracing the interconnections hedge funds have with other parts of the financial 

sector. She noted that the Council’s public update is a progress report and that there is still more 

to consider. 

Thomas Curry, Comptroller of the Currency, then thanked the staff of the Council member 

agencies for their hard work. He called the Council’s public update an important step in the 

process of identifying financial stability risks and developing options for addressing those risks. 

He noted that a key recommendation is the creation of an interagency working group that will 

focus on hedge fund activities that might pose risks to financial stability. He said that the group 

is expected to examine regulatory and supervisory data to evaluate the use of leverage by these 

funds, assess the sufficiency and accuracy of existing data, and consider how the data might be 

augmented to improve the Council’s ability to evaluate risks to financial stability. 

Comptroller Curry noted that that collective investment funds were of particular interest to the 

OCC. He said that, as the regulator of many of these funds, the update goes a long way in 

clarifying the differences and similarities between collective investment funds and other pooled 

investment vehicles, such as mutual funds, including that collective investment funds cannot be 

accessed by retail investors or intuitional money managers and that there are restrictions on how 

collective investment funds are advertised. He said that the vast majority of the assets in these 

funds are retirement savings that tend to pose less liquidity and investment risk than other 

investments but that the OCC will continue to focus on liquidity and leverage issues that may be 

associated with these funds and is closely following developments at the Council in this area. 

The Chairperson then turned to Michael McRaith, Director of the Federal Insurance Office. 

Director McRaith thanked the staff who had worked on the Council’s public update. He said that 

the work of the Council in this area underscores the importance of collaboration among the 
11 

Council members. He noted that this work is relevant to the insurance sector and that he strongly 

supports the views in the update. 

The Chairperson then turned to Richard Cordray, Director of the CFPB. Director Cordray 

thanked the staff for their work on the Council’s public update. He noted the importance for the 

Council to continue to make progress regarding potential risks. He stated that the creation of the 

hedge fund working group was important, because no single regulator has a complete window 

into the risk profile of hedge funds, and that the ability to assess risks and mitigants is 

constrained by data limitations. He expressed his support for the Council’s public update. 

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

publication of the Council’s public update on asset management:

“WHEREAS, section 112 of the Dodd-Frank Wall Street Reform and Consumer Protection Act 

provides that the purposes of the Financial Stability Oversight Council (the “Council”) are to 

identify risks to the financial stability of the United States that could arise from the material 

financial distress or failure, or ongoing activities, of large, interconnected bank holding 

companies or nonbank financial companies, or that could arise outside the financial services 

marketplace; to promote market discipline, by eliminating expectations on the part of 

shareholders, creditors, and counterparties of such companies that the government will shield 

them from losses in the event of failure; and to respond to emerging threats to the stability of the 

United States financial system; and 

WHEREAS, in May 2014, the Council hosted a public conference on asset management; and 

WHEREAS, in July 2014, the Council directed staff to undertake a more focused analysis of 

industry-wide products and activities to assess potential risks across the asset management 

sector; and 

WHEREAS, in December 2014, the Council published a notice seeking public comment 

regarding whether and how certain asset management products and activities could pose 

potential risks to U.S. financial stability; and 

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

analyzed potential risks to financial stability that may arise from certain asset management 

products and activities; and 

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

expertise of their staffs and the staffs of their member agencies with respect to the Council’s 

evaluation of potential risks to financial stability that may arise from certain asset management 

products and activities; and 

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

on Review of Asset Management Products and Activities” attached hereto (the “Asset 

Management Update”). 
12 

NOW, THEREFORE, BE IT RESOLVED, that the Council approves the Asset Management 

Update and authorizes the Chairperson, or his designee, to cause the Asset Management Update 

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

his designee, and to otherwise make it available to the public as the Chairperson deems 

appropriate; and 

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

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

Management Update and to take such other actions as they 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. 

 2. Resolutions Approving the Minutes of the Meetings Held on March 2, 2016 and March 

21, 2016 

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

minutes attached hereto of the meeting held on March 2, 2016 of the Council are hereby 

approved.” 

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

minutes attached hereto of the meeting held on March 21, 2016 of the Council are hereby 

approved.” 

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

The Council approved the resolutions by unanimous vote. 

 3. Other Business 

The Chairperson then noted that this was the last meeting of the Council that Chairman Matz 

would be attending, and thanked her for her service. Chairman Matz said that the Council had 

sent a strong message that the era of “too big to fail” is over. She said that the Council has 

promoted greater collaboration across financial regulators and has been careful to seek out 

industry opinions and academic research and consider a wide range of views. Chairman Matz 

also noted that the Council’s public update on asset management highlights the risks to that 

sector from service providers. She noted that the NCUA does not have the authority to oversee 

third-party service providers, and that this inability was a regulatory blind spot. She thanked the 

Council for its support in closing this loophole. She stated that she believed the Council’s 

actions will mitigate the likelihood of another financial crisis. She concluded that the Council 

must not lose sight of the need to protect jobs and businesses on Main Street by providing 

effective oversight of Wall Street, and she encouraged the Council to remain steadfast in this 

objective. 

The Chairperson adjourned the meeting at approximately 5:38 P.M. (EDT).