The Financial Stability Oversight Council (FSOC) voted unanimously to issue proposed interpretative guidance for public comment on nonbank financial company designations, reinstating elements from its 2019 interpretive guidance and adding changes reflecting FSOC’s current view of financial stability. The proposal shifts emphasis toward an activities-based approach, with entity-specific designations positioned as a backstop where risks cannot be adequately addressed through activity-focused tools. Under the proposed guidance, FSOC would incorporate economic growth and economic security into its analysis of risks to U.S. financial stability. It would also commit to performing a cost-benefit analysis before any designation decision, including assessing the likelihood of a company’s material financial distress, and would make a designation only where expected benefits justify expected costs. Procedurally, the proposal introduces a pre-designation “off-ramp” that would identify steps a nonbank financial company or financial regulators could take to mitigate a potential threat, and allow time for risks to be addressed, aiming to increase transparency in the designation process. The proposed guidance will be subject to a 45-day public comment period after publication in the Federal Register.
U.S. Department of the Treasury 2026-03-25
The U.S. Financial Stability Oversight Council launches consultation on revised approach to designating nonbank financial companies
The Financial Stability Oversight Council (FSOC) proposed new interpretative guidance on nonbank financial company designations, emphasizing an activities-based approach with entity-specific designations as a backstop. The guidance includes economic growth and security in risk analysis and mandates a cost-benefit analysis before designations. It also introduces a pre-designation "off-ramp" to enhance transparency and allow risk mitigation.