News

FSOC Proposes Changes to Nonbank “Systemically Important” Designation

March 31, 2026

On March 25, the Financial Stability Oversight Council (Council), an interagency forum of financial regulators chaired by Treasury Secretary Scott Bessent, issued a new proposal that would undo interpretative guidance changes made under the Biden administration. Comments are due in 45 days.

  • The Biden-era revisions made it easier for the Council to designate nonbank financial institutions as systemically important.

According to Secretary Bessent:

Today’s proposed guidance would return the Council to prioritizing an activities-based approach where we focus first on risks that arise from specific activities and practices across markets, rather than single out individual firms.
  • As reported by Politico, this proposal aligns with Bessent’s previously-stated priority of having the Council focus on economic growth, rather than “prophylactic” measures to prevent financial collapse.

The proposed interpretive guidance seeks to:

  • Incorporate economic growth and security into the analysis of risks to financial stability;
  • Prioritize identifying, assessing, and addressing risks through an activities-based approach;
  • Commit to performing a cost-benefit analysis before a designation decision; and
  • Provide a pre-designation “off-ramp” and promote greater transparency.

What they are saying: Council members voted unanimously to issue the proposed interpretative guidance for public comment. 

Federal Reserve Chair Jerome Powell, stated:

I’m very happy to vote to put these revisions to the nonbank designation guidance today. In particular, I want to point out that I do think it’s appropriate that we set the bar for designation very high.

Yet, some policymakers shared their concerns that the proposal could make it more difficult for regulators to address future threats to financial stability.

Ranking member of the Senate Banking Committee, Sen Elizabeth Warren (D-Mass.), as reported by Politico, cautioned:

Our economy is at a precarious moment. Instead of strengthening the resilience of the financial system in the face of these risks, the Trump Administration is doing the opposite: deregulating Wall Street and defanging the post-2008 financial crisis authority designed to prevent shadow banks like Lehman Brothers and AIG from tearing down our economy.
Please contact Sairah Burki (sburki@crefc.org) with questions.

Contact  

Sairah Burki
Managing Director,
Head of Regulatory Affairs
703.201.4294
sburki@crefc.org
The information provided herein is general in nature and for educational purposes only. CRE Finance Council makes no representations as to the accuracy, completeness, timeliness, validity, usefulness, or suitability of the information provided. The information should not be relied upon or interpreted as legal, financial, tax, accounting, investment, commercial or other advice, and CRE Finance Council disclaims all liability for any such reliance. © 2026 CRE Finance Council. All rights reserved.

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