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Saturday, Oct 17, 2026

U.S. financial regulators to tighten rules on non-bank firms, risk assessment

U.S. financial regulators to tighten rules on non-bank firms, risk assessment

The Financial Stability Oversight Council on Friday proposed guidance to make it easier to designate non-bank financial institutions for regulatory supervision and new procedures to better identify and respond to financial system risks.
The multi-regulator council charged with policing stability risks in the financial system released the proposals for public comment just over a month after two regional bank failures sparked the biggest contagion threat since the 2008 financial crisis.

U.S. Treasury Secretary Janet Yellen has raised concerns about non-bank financial institutions, including hedge funds, private equity firms and pension funds as a potential source of financial instability because of a lack of supervision and.

She said in remarks to the FSOC's meeting that the banking system remains sound, but "we continue to be vigilant and monitor conditions closely."

But the banking sector turmoil showed that showed financial regulators' "work is not done" and supervisory and regulatory changes are needed "to help prevent financial disruptions from starting and spreading in the first place," Yellen said.

FSOC, chaired by Yellen and including Federal Reserve Chair Jerome Powell and head of other major financial regulators, was granted the ability to designate non-bank firms as systemically important, but this was made more difficult in 2019 with changes made under the Trump administration.

The new guidance removes some "inappropriate hurdles" to designating non-bank firms and replaces them with a process that allows for firms under review to have significant engagement with regulators.

National Credit Union Administration Chair Todd Harper described the 2019 designation process as "an overly lengthy and Rube Goldberg-like process with various hurdles for doing so."

"This new guidance that we are releasing today for public condiment provides a substantial improvement in this process. It has an important attributes of being clear, credible, balanced and consistent," he said.

A U.S. Treasury official told reporters, however, that the new guidance was not a full return to the original 2012 rules put in place by the Dodd-Frank financial reform law.

RISKS, VULNERABILITIES
FSOC's proposed new risk assessment framework aims to enhance the council's ability to address financial stability risks by reviewing a broad range of asset classes, institutions and activities, according to a Treasury fact sheet.

These include markets for debt, loans, short-term funds equities, digital assets and derivatives; counterparties, payment and clearing systems; and financial entities including banking institutions, broker dealers, asset managers, investment firms, insurers, and mortgage originators and services.

The new framework also specifies vulnerabilities that FSOC and member regulators would consider when evaluating potential stability risks. These include leverage, liquidity risk and maturity mismatches, market interconnections and concentration, operation risks and risk management activities.
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