FSOC Releases 2022 Annual Report

The Financial Stability Oversight Council (FSOC) unanimously approved its 2022 annual report which “reviews financial market developments, describes potential emerging threats to U.S. financial stability, identifies vulnerabilities in the financial system, and makes recommendations to mitigate those threats and vulnerabilities.” The report makes specific recommendations regarding non-bank financial intermediation, digital assets, climate related financial risk, Treasury market resilience, cybersecurity, and the transition away from LIBOR.

In the digital asset space, the report identified gaps in regulatory oversight of crypto entities and recommended the enactment of legislation providing for rulemaking authority for federal financial regulators over the spot market for crypto-assets that are not securities. The report also noted that some crypto entities offer services similar to traditional financial institutions creating risk for consumers. The FSOC also recommends that regulators increase data analysis capabilities, monitoring, and supervision of digital asset activities.

On climate-related financial risk, the FSOC report supports further actions to “improve the availability of data for assessing climate-related financial risks and recommends state and federal agencies coordinate to identify, prioritize, and procure the necessary data.” Additionally, the Council encourages both federal and state regulators to ensure properly tailored supervision of risk management practices as well as promoting useful and consistent disclosures that allow investors to consider climate-related financial risks.

Click here to read the Treasury Department’s press release covering the 2022 annual report.
Click here to read SEC Chair Gary Gensler’s statement at the FSOC December meeting.