WASHINGTON, D.C. – Dennis M. Kelleher, Cofounder, President and CEO, issued the following statement in connection with the closed-door meeting of the Financial Stability Oversight Council (“FSOC”) today:
“The FSOC was a critically important innovation of the post-2008 crash financial reform law with two key goals: end regulatory arbitrage by designating and regulating systemically significant nonbanks, and be an early warning system that identifies, evaluates, and takes action to prevent unseen risks like AIG from surprising policymakers. Unfortunately, today’s meeting was yet another missed opportunity for the FSOC to fulfill its mission. Closed door discussions of various risk topics in executive session, which is the FSOC’s MO, is not why the FSOC was created, is not taking necessary action, and is not serving the American people.
“For example, the FSOC today continued to discuss climate-related financial risk indicators and narrative analysis, but those risks are well-known and well-documented. What the FSOC needs to do is to take action to address those known risks. This inaction is especially concerning given that the U.S. banking regulators are increasingly falling behind international peers with regard to regulation of and protection against climate-related financial risk.
“As important, today’s meeting was notable for what was missing from today’s agenda. It has been nearly a year since the FSOC reinstated its authority to end systemic threats from nonbanks, years after being baselessly gutted during the Trump administration. At that time, we applauded FSOC’s action because it recognized the dangerous buildup of unseen and unregulated threats at nonbanks and provided a clear path for FSOC action to prevent it and provide the American people and financial system with deserved protections. That is particularly critical because the nonbank sector is now materially larger than the banking sector (with 60 percent of total assets), but not one single nonbank in the U.S has been designated by the FSOC. There was some hope earlier this year that the FSOC was going to take action in this regard when it published a comprehensive report detailing the serious threats of nonbank mortgage companies that could damage the entire housing sector. Yet, now as the Biden administration comes to a close, there has been zero action by FSOC to address the clear and present threats from nonbanks. These failures are inexplicable and require immediate action if the American people are going to get the benefit of the 2010 financial reform law and be protected from the threats the FSOC was created to address.”
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