Minutes of the Financial Stability Oversight Council

November 15, 2021 

PRESENT: 

Nellie Liang, Under Secretary for Domestic Finance (acting pursuant to delegated authority) 

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) 

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

Eric Cioppa, Superintendent, Maine Bureau of 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)

Sandra Lee, Deputy Assistant Secretary for the Financial Stability Oversight Council (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

Gregory Gelzinis, 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

Sriram Rajan, Associate Director

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:

Report on the Treasury Market by the Staffs of the Inter-Agency Working Group on Treasury 

Market Surveillance 

• Brian Smith, Deputy Assistant Secretary for Federal Finance, Treasury 

President’s Working Group on Financial Markets Report on Stablecoins 

• Jordan Bleicher, Senior Advisor, Office of Domestic Finance, Treasury 

• Mary Watkins, Attorney-Advisor, Treasury 
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2021 Annual Report 

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

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

Council, Treasury (available for questions) 

Executive Session

Under Secretary Liang called the executive session of the meeting of the Council to order at 

approximately 3:03 P.M. The Council convened by videoconference. Under Secretary Liang 

began by noting that the Secretary and Deputy Secretary of the Treasury were unavailable for the 

meeting. She then welcomed Treasury’s new Deputy Assistant Secretary for the Council, Sandra 

Lee. Under Secretary Liang 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 progress report on the Treasury market recently issued by staff of agencies participating in 

the Inter-Agency Working Group on Treasury Market Surveillance (IAWG), (2) an update on the 

report on stablecoins issued in August 2021 by the President’s Working Group on Financial 

Markets (PWG), (3) the Council’s 2021 annual report, and (4) a vote on the minutes of the 

Council’s meeting on October 21, 2021. 

1. IAWG Report on the Treasury Market

Under Secretary Liang turned to the first agenda item, a presentation on the IAWG staff progress 

report on the Treasury market. She stated that the work of the IAWG on this issue was important 

because the smooth functioning of the Treasury market is vital for maintaining financial stability 

and financing the operations of the federal government. She then introduced Brian Smith, 

Deputy Assistant Secretary for Federal Finance at Treasury. 

Mr. Smith began by noting that the IAWG serves as an important mechanism for collaboration 

on issues related to the Treasury market, and he then summarized the key themes in the report. 

He stated that recent disruptions in the Treasury market highlighted the importance of improving 

resilience in this market. He discussed several market disruptions in recent years, most notably 

in March 2020, when a “dash for cash” precipitated unprecedented sales of Treasury securities, 

intermediaries’ capacity could not keep pace, and market liquidity deteriorated. He said it was 

important to consider the impact of previous disruptions on different segments of the Treasury 

market, and he noted that IAWG staff was examining common themes across these episodes. 

Mr. Smith stated that demand for liquidity in March 2020 came from many sources, including 

foreign investors managing cross-border exposures, open-end mutual funds managing 

redemptions, hedge funds reducing positions and facing margin calls, and pension and insurance 

funds rebalancing holdings. He noted that challenges to intermediation included increasing risks 

to market-making, differences across market segments in margin and circuit breakers, and 

operational difficulties introduced by working from home during the pandemic.

Mr. Smith then described six principles related to the Treasury market that policymakers should 

seek to promote: resilient and elastic liquidity; transparency that fosters public confidence, fair 
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trading, and a liquid market; prices that reflect prevailing and expected economic and financial 

conditions; economic integration across cash, funding, and derivatives markets; financing that 

does not pose a significant threat to financial stability; and infrastructure that operates effectively 

and efficiently.

Mr. Smith noted that the IAWG report addressed ongoing efforts in five workstreams to 

strengthen market resilience: improving resilience of market intermediation by reducing 

bottlenecks, whether regulatory or technological; improving data quality and availability by 

enhancing data collection, pursuing additional transparency, and identifying additional data to 

collect; evaluating the costs and benefits of expanded central clearing; enhancing trading venue 

transparency and oversight; and assessing the effects of fund leverage and liquidity risk 

management practices. 

Mr. Smith concluded by describing potential policy options and next steps that staff were 

exploring, including some areas where important progress has already been made. He said that

efforts were underway to improve relevant data, noting that the Financial Industry Regulatory 

Authority (FINRA) was undertaking work to enhance Trade Reporting and Compliance Engine 

(TRACE) data. He also described efforts to improve the oversight of trading venues, including 

the SEC’s September 2020 proposal to enhance the operational transparency, system integrity, 

and regulatory oversight for alternative trading systems for certain government securities. In the 

area of intermediation, he noted that in July 2021, the Federal Reserve announced the 

establishment of a domestic standing repo facility, to enable the Federal Reserve to conduct daily 

overnight repo operations against Treasury securities, agency debt securities, and agency 

mortgage-backed securities. Finally, he noted that on November 17, 2021, the IAWG would 

convene its seventh annual U.S. Treasury Market Conference to discuss recent developments and 

proposals to improve Treasury market resilience. 

Council members then had a discussion about the report, including potential regulatory actions 

the SEC may undertake to address issues identified in the report, and the importance of liquidity 

in the Treasury market. 

2. PWG Report on Stablecoins 

Under Secretary Liang then introduced the next agenda item, a presentation on the PWG report 

on stablecoins. She turned to Jordan Bleicher, Senior Advisor in the Office of Domestic Finance 

at Treasury, and Mary Watkins, Attorney-Advisor at Treasury. 

Mr. Bleicher began by noting that the recommendations in the PWG report focused on payment 

stablecoins, defined as stablecoins that are designed to maintain a stable value relative to a fiat 

currency and, therefore, have the potential to be used as a widespread means of payment. He 

stated that the recommendations in the report were intended to reduce prudential risks such as

stablecoin runs, payment system risks, and concerns about concentration of economic power. He 

said that the report made clear that other existing regulatory or supervisory authorities would still 

apply, including to address market and investor-protection risks.
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Mr. Bleicher then described the key recommendations in the PWG report. He stated that the 

report recommended that Congress enact legislation to ensure that payment stablecoins are 

subject to a federal prudential framework on a consistent and comprehensive basis. He said that 

the report also recommended that while Congress considers how to address risks associated with 

payment stablecoin arrangements, regulatory agencies should continue to use their existing 

authorities to address prudential risks to the extent possible. He said that the report also 

recommended that in the event Congress does not act, the Council should consider steps 

available to it to reduce payment stablecoin risks. 

Mr. Bleicher then summarized the report’s legislative recommendations with regards to issuers

of payment stablecoins. He said the report recommended that such issuers should be required to 

become insured depository institutions, which are subject to supervision and regulation at the 

depository institution level by a federal banking agency and consolidated supervision and 

regulation by the Federal Reserve at the holding company level; are subject to capital and 

liquidity standards, activity limits, and restrictions on affiliation; and have access to Federal 

Reserve account services and the Federal Reserve’s Discount Window.

Mr. Bleicher next summarized the report’s legislative recommendations with regard to custodial 

wallet providers. He said that the report recommended that custodial wallet providers, defined as 

wallet providers that users rely on to hold stablecoins, should be subject to appropriate federal 

oversight. He noted that this recommendation reflected the central role that custodial wallet 

providers play within a stablecoin arrangement. He said that the report recommended that 

oversight of custodial wallet providers should include the authority to restrict these providers 

from lending customer stablecoins, and to require compliance with appropriate risk-management, 

liquidity, and capital requirements. He said the report also stated that, to address concerns about 

concentration of economic power, Congress may consider other standards for custodial wallet 

providers, such as limits on affiliation with commercial entities or on use of users’ transaction 

data. 

Ms. Watkins then stated that the final legislative recommendation in the PWG report reflected 

the fact that stablecoin arrangements may be undertaken by a variety of parties. She said the 

report included a recommendation to Congress that the federal supervisor of a stablecoin issuer 

should have authority to require any entity that performs activities critical to the functioning of 

the stablecoin arrangement to meet appropriate risk-management standards.

Ms. Watkins noted that the PWG agencies were committed to taking action to address risks 

within each agency’s jurisdiction, and to continued coordination and collaboration on issues of 

common interest across the federal financial regulatory agencies.

Finally, Ms. Watkins stated that in the absence of Congressional action, the report recommended 

that the Council consider steps available to it to address the risks outlined in the report. She said 

that such steps may include the designation of certain activities conducted within stablecoin 

arrangements as, or as likely to become, systemically important payment, clearing, and 

settlement (PCS) activities. She noted that designation would permit the appropriate agency to 
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establish risk-management standards for financial institutions that engage in designated PCS 

activities, such as requirements in relation to the assets backing the stablecoin. 

Council members then had a discussion about the report, including steps that Congress may take 

in response to the recommendations and the potential for the Council to designate PCS activities

related to stablecoin arrangements. 

3. 2021 Annual Report

Under Secretary Liang turned to the next agenda item, the Council’s 2021 annual report. She 

introduced 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.

Mr. Rose provided an update regarding the proposed timing for completion of the report, and 

noted that the Council would vote on the report at its December meeting. Mr. Rose then 

highlighted certain potential recommendations that the report may include.

Council members then asked questions and had a discussion about the draft report, including 

potential recommendations that may appear in the report regarding digital assets and other issues. 

4. Resolution Approving the Minutes of the Meeting Held on October 21, 2021 

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

minutes attached hereto of the meeting held on October 21, 2021 of the Council are hereby 

approved. 

Under Secretary Liang asked for a motion to approve the resolution, which was made and 

seconded. The Council approved the resolution by unanimous vote.

5. Other Business

Before the meeting concluding, Gary Gensler, Chair of the SEC, noted that the SEC would be 

issuing a proposed rule on the public disclosure of securities lending transactions, and he 

described the proposal. 

Under Secretary Liang adjourned the meeting at approximately 4:03 P.M.