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Minutes of the Financial Stability Oversight Council

November 16, 2017

PRESENT: 

Steven T. Mnuchin, 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) 

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

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

telephone)

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

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

Keith Noreika, Acting Comptroller of the Currency, Office of the Comptroller of the Currency 

(OCC)

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

S. Roy Woodall, Independent Member with Insurance Expertise 

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

(non-voting member) (by telephone)

Ray Grace, Commissioner, North Carolina Office of the Commissioner of Banks (non-voting 

member) 

Peter Hartt, Director, Insurance Division, New Jersey Department of Banking & Insurance 

(non-voting member)

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

Division (non-voting member)

GUESTS: 

Department of the Treasury (Treasury)

Craig Phillips, Counselor to the Secretary

Brian Callanan, Deputy General Counsel

Bimal Patel, Deputy Assistant Secretary for the Council

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

Director of the Council

Board of Governors of the Federal Reserve System

Randal Quarles, Vice Chairman for Supervision

Andreas Lehnert, Director, Division of Financial Stability

Federal Deposit Insurance Corporation

Jason Cave, Special Advisor to the Chairman for Supervisory Matters

Securities and Exchange Commission

Jaime Klima, Chief Counsel
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Commodity Futures Trading Commission

Richard Danker, Special Advisor

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

Grace Dailey, Senior Deputy Comptroller for Bank Supervision Policy and Chief National Bank 

Examiner

National Credit Union Administration

Ralph Monaco, Chief Economist

Office of the Independent Member with Insurance Expertise

Diane Fraser, Senior Policy Advisor

Federal Reserve Bank of New York 

William Dudley, President and Chief Executive Officer (by telephone)

Office of Financial Research

Stacey Schreft, Deputy Director for Research and Analysis

Federal Insurance Office

Steven Seitz, Deputy Director

North Carolina Office of the Commissioner of Banks

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

Supervisors

New Jersey Department of Banking & Insurance

Mark Sagat, Assistant Director, Financial Policy and Legislation, National Association of 

Insurance Commissioners

Maryland Office of the Attorney General, Securities Division

Christopher Staley, Counsel, North American Securities Administrators Association

PRESENTERS:

Update on 2017 Annual Report 

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

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

Council, Treasury 
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Alternative Reference Rates Committee and Bilateral Repurchase Agreement Data Collection 

Update

• David Bowman, Special Advisor to the Board of Governors, Federal Reserve 

• Stacey Schreft, Deputy Director for Research and Analysis, OFR

Executive Session

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

approximately 3:11 P.M.

The Chairperson began by acknowledging the recent announcement by Richard Cordray, 

Director of the CFPB, that he intended to resign from the CFPB, and thanked him for his service. 

He also thanked Keith Noreika, Acting Comptroller of the Currency, for his service. He then 

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

with other materials. The agenda for the executive session of the meeting included the Council’s 

2017 annual report.

1. 2017 Annual Report

The Chairperson then introduced the first agenda item, the Council’s 2017 annual report, and 

turned to Bimal Patel, Deputy Assistant Secretary for the Council at Treasury, and Stephen 

Ledbetter, Director of Policy in the Office of the Financial Stability Oversight Council at 

Treasury.

Mr. Patel first provided an overview of the process for developing the Council’s annual report. 

He stated that it was a collaborative process and that interagency discussions regarding the draft 

had been positive. He then described the structure of the report, which includes a signed 

statement by Council members, Council recommendations, descriptions of financial and 

regulatory developments, and a discussion of potential emerging threats and vulnerabilities. 

Messrs. Patel and Ledbetter then elaborated on recommendations that may be included in the 

report and potential emerging threats and vulnerabilities to financial stability that the report may 

identify. 

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

expected timeline for drafting the report, potential emerging threats to be identified in the report,

and the recommendations that may be included in the report.

2. Other Business

The Chairperson then noted that Treasury would soon release a report on the Council’s 

designation processes pursuant to a presidential memorandum issued on April 21, 2017. With 

respect to the pending litigation brought by MetLife against the Council relating to the Council’s 

final determination regarding the company, the Chairperson requested other Council members’ 

views regarding a proposal that the government ask the court to set a schedule for the parties to 

file briefs regarding the report. No Council members expressed opposition to that proposal. 
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Chairman Clayton recused himself from participating in the discussion.

The Chairperson then turned to Craig Phillips, Counselor to the Secretary at Treasury, to discuss 

the OFR. Mr. Phillips noted that Richard Berner, Director of the OFR, had recently announced 

his intention to depart the OFR. Director Berner thanked the Chairperson and the other Council 

members. Mr. Phillips then stated that Ken Phelan, Chief Risk Officer at Treasury, would fill in 

after Director Berner’s departure, with the support of other Treasury and OFR staff. He noted 

that Treasury has studied the OFR and intends to focus on how the OFR can efficiently 

accomplish its mission. He stated that Treasury would seek input from other Council members 

regarding the OFR and how to calibrate it to the future of FSOC.

The Chairperson adjourned the executive session of the meeting at approximately 3:38 P.M.

Public Session

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

3:43 P.M.

The Chairperson began by noting that this was the first public meeting of the year and stated that 

the Council is an important venue for regulators to come together, discuss pressing issues 

affecting financial firms and markets, and collaborate on the best path forward. He stated that he 

intended to continue using the Council to help ensure that the financial regulatory system is 

effective and efficient, and he thanked the other Council members for their continued 

engagement.

The Chairperson then outlined the agenda for the open session, which included: (1) a vote on a 

Council regulation implementing the Freedom of Information Act; (2) votes on the minutes of 

the Council’s meetings on September 22, 2017, and September 29, 2017; and (3) an update on 

the work of the Alternative Reference Rates Committee and efforts to collect bilateral repurchase 

agreement data.

1. Freedom of Information Act Regulations 

The Chairperson introduced the first agenda item, a vote to approve revised Freedom of 

Information Act (FOIA) regulations for the Council. He noted that the previous year, Congress 

had adopted amendments to FOIA that required federal agencies to enact changes to their FOIA 

regulations. He stated that the previous November, the Council had issued an interim final rule 

reflecting those statutory requirements, and that the Council was now voting to approve a final 

rule. He remarked that this was an important piece of housekeeping to ensure that the Council’s 

FOIA rules stay up to date.

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

WHEREAS, the Freedom of Information Act (the “FOIA”) governs public access to federal 

agency records and requires each agency to publish implementing regulations; and
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WHEREAS, the FOIA Improvement Act of 2016 requires all agencies to revise the regulations 

they have adopted to implement the FOIA; and

WHEREAS, on November 16, 2016, the Council approved an interim final rule that made the 

changes mandated by the FOIA Improvement Act of 2016 and certain other technical changes; 

and

WHEREAS, the staffs of Council members and their agencies have prepared a final rule that 

addresses comments received and makes certain additional technical changes; and 

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

approve the final rule and publish it as set forth in the attached Federal Register document. 

NOW, THEREFORE, BE IT RESOLVED, that the Council hereby approves the final rule as 

presented and authorizes the Chairperson, or his designee, to cause the attached final rule to be 

published in the Federal Register, 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. 

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 

attached final rule to ensure that it can be published in the Federal Register, and to take such 

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

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

in connection with its publication.

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

The Council approved the resolution by unanimous vote.

2. Resolutions Approving the Minutes of the Meetings Held on September 22, 2017, and 

September 29, 2017

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

minutes attached hereto of the meeting held on September 22, 2017 of the Council are hereby 

approved.

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

The Council approved the resolution by unanimous vote.

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

minutes attached hereto of the meeting held on September 29, 2017 of the Council are hereby 

approved.

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

The Council approved the resolution by unanimous vote.
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3. Alternative Reference Rates Committee and Bilateral Repurchase Agreement Data 

Collection Update

The Chairman then introduced David Bowman, Special Advisor to the Board of Governors at the 

Federal Reserve, to provide an update on the work of the Alternative Reference Rates Committee 

(ARRC), and Stacey Schreft, Deputy Director for Research and Analysis at the OFR, to provide 

an update on the OFR’s bilateral repurchase agreement (repo) data collection initiative. 

Mr. Bowman began by noting that, although the Council has long endorsed the goal of

strengthening the London Interbank Offered Rate (LIBOR), it has also warned of the potential 

risks of LIBOR and encouraged work aimed at identifying alternative rates and promoting their 

use where appropriate. He described how efforts to strengthen LIBOR had been hampered by 

the fact that there are very few transactions in the underlying wholesale funding markets that 

LIBOR is meant to represent. He noted that the United Kingdom’s Financial Conduct Authority

was seeking an agreement with banks on the LIBOR panel to stay on voluntarily through the end 

of 2021.

Mr. Bowman explained that the Federal Reserve had convened the ARRC in 2014 in cooperation 

with Treasury, the CFTC, and the OFR to develop alternatives to the use of LIBOR, develop 

plans for the use of those alternatives, and recommend best practices for contract robustness. 

Mr. Bowman stated that in June 2017 the ARRC had selected a broad Treasury repo rate, the 

secured overnight financing rate (SOFR), as its recommended alternative to LIBOR. He said 

that SOFR will be published by the Federal Reserve Bank of New York in cooperation with the 

OFR beginning in the second quarter of 2018, including both tri-party and cleared bilateral repo 

transactions collateralized by Treasury securities. Mr. Bowman then discussed the 

characteristics of the rate compared to other market rates, and he said that the OFR’s authority to 

collect data will help to ensure the stability of the rate’s production and its ability to expand to 

incorporate new sources as warranted.

 

Mr. Bowman said that, given the magnitude of the transition that will be necessary if LIBOR 

does not continue, it would be prudent for market participants to consider the long-term 

prospects of the alternatives they use as a replacement for LIBOR. He explained that the current 

definition of LIBOR embedded in the documentation of the International Swaps and Derivatives 

Association (ISDA) specifies that agents should seek quotes from London or New York banks if 

LIBOR is not published, but he stated that it seems likely that banks would not be willing to 

quote a rate in that circumstance. He said that ISDA expects to update its definitions and offer a 

protocol to allow users to build more robust contract language into their legacy contracts, with 

the primary backup expected to be based on SOFR. He said that it will be important that the 

updated ISDA protocol be widely adopted once it is available.

Mr. Bowman said that the ARRC has also developed plans to promote the use of SOFR in 

derivatives, the goal being to develop a liquid derivatives market that would be the basis for 

developing a term reference rate by the end of 2021. He said that this plan and the work by 

ISDA have both centered on derivatives but that many cash instruments have fallback language 

similar to that in the ISDA definitions. He explained that ARRC is working to catalog these 

fallbacks and to develop strategies to address risks that they may pose. He stated that, in order to 
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aid in these efforts, the ARRC will expand its membership to incorporate a wider set of end users 

and trade groups into its work. 

Mr. Bowman concluded by stating that the next four years will be crucial in ensuring that the 

ARRC’s plans are able to materially lessen the risks to the U.S. financial system associated with 

LIBOR. He said that the ARRC will need the active engagement of all market participants in 

order to ensure that transitions can be safely implemented and that the ARRC will need the 

continued support of Council members. 

Ms. Schreft then provided an update on the OFR’s bilateral repo data collection initiative. She 

noted that for several years the Council has called for better insight and transparency into 

markets for securities financing transactions. She said the OFR intended to collect data in two 

stages. She stated that the first stage would involve data on cleared repo transactions, for which 

the OFR intended to issue a notice of proposed rulemaking in the first half of 2018. The second 

stage would cover data on uncleared bilateral repo transactions. 

She said that the OFR’s data collections would permit the monitoring of tenor and rates across a 

broad range of collateral and would help provide an understanding of the functioning of, and 

identify stress in, asset and funding markets. She said that the interest rate information to be 

collected on cleared bilateral repo transactions is critical to the production of the SOFR. She 

stated that the collection of data on uncleared bilateral repo transactions would ensure the 

availability of comprehensive data as financial markets evolve. She also noted that by shedding 

light on repo funding, these collections would support other Council initiatives, including by 

providing a better understanding of the liquidity of Treasury securities markets. 

The Chairperson adjourned the meeting at approximately 4:01 P.M.