03.26.26

FSOC Proposes Stricter Standards for Increasing Nonbank Oversight

by: Courtney Degen

The Financial Stability Oversight Council (FSOC) proposed new guidance that would significantly raise the bar for designating nonbank firms as systemically important financial institutions. The framework shifts focus toward an “activities-based” approach, prioritizing risks across markets rather than targeting individual companies. Firm-specific designations would only occur if broader measures fail to address systemic threats. The proposal largely returns to a 2019-era approach, emphasizing rigorous cost-benefit analysis and requiring a high threshold for defining systemic risk. It also allows companies to address regulatory concerns before facing designation.

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