Financial Stability Oversight Council Improvement Act of 2025
The Financial Stability Oversight Council Improvement Act of 2025 would add a new, required step to the process by which the Financial Stability Oversight Council (FSOC) determines whether a U.S. nonbank financial company should be supervised by the Federal Reserve (the Board of Governors). Before FSOC can vote to designate such a company for Fed supervision, the bill requires FSOC to conduct an “Initial determination” in which FSOC, in consultation with the company and the primary regulator for that company, assesses whether alternative actions—such as applying new or heightened standards or safeguards or a written plan submitted by the company—are impracticable or insufficient to mitigate the threat to U.S. financial stability. The bill thus shifts some designations toward a more collaborative process that considers alternatives before moving forward with Fed supervision. This change is designed to give nonbank financial companies and their primary regulators a formal say in the decision-making process and to ensure that other tools or plans are considered before designation to the Fed. It could slow the designation process but may improve alternatives and mitigate risks through preventive measures or negotiated plans.
Key Points
- 1New initial-determination requirement: FSOC may not vote on designating a U.S. nonbank financial company for Fed supervision until it makes an initial determination that other actions are impracticable or insufficient to mitigate systemic risk.
- 2Mandatory consultation: The initial determination must be made in consultation with the company and the primary financial regulatory agency for that company.
- 3Consideration of alternatives: Alternatives include actions by FSOC or the regulatory agency (including applying new or heightened standards and safeguards under section 120) to address risk.
- 4Company-submitted plan as an option: The company can submit a written plan promptly to FSOC for consideration as an alternative to designation.
- 5Cross-reference and process changes: The bill modifies how the council’s determination interacts with other subsections, ensuring the initial-determination step is integrated into the designation process.