WASHINGTON–The Financial Services Oversight Council (FSOC), of which NCUA is a member, has released six recommendations in its annual report, including what it wants to see related to non-banks and oversight of what it called the “crypto-asset ecosystem.”
FSOC includes all federal financial institution regulators and other agencies that supervise financial markets and products. In its new report, FSOC provides an overview of the potential emerging threats to U.S. financial stability, identifies what it said are vulnerabilities in the financial system, and offers some recommendations to regulators to mitigate vulnerabilities and threats.
The Recommendations
FSOC’s six recommendations for protecting the financial system include:
- Address risks presented by investment funds through support for initiatives by the Securities and Exchange Commission (SEC) and other agencies, including proposed data-collection improvements to the SEC’s Form PF and other new rules proposed by the SEC.
- Enact legislation providing for rulemaking authority by federal financial regulators over the spot market for crypto-assets that are not securities, which FSOC said is slipping through a gap in the rules. Until such rules are in place, the council recommended, agencies should continue to enforce existing rules and regulations applicable to the crypto-asset ecosystem.
- Identify, prioritize, and procure the necessary data for assessing climate-related financial risks through state and federal agencies’ coordination. The report calls on state and federal agencies to continue advance their work on appropriately tailored supervisory expectations of regulated entities’ risk management practices.
- Review Treasury market structure and liquidity challenges in the context of changes in the technology and the counterparties providing market liquidity, as well as the growth in Treasury debt outstanding, to enhance the resilience of the market.
- Continue gathering additional information for managing cyber risk in order to monitor and assess cyber-related financial stability risks and build cyber resilience.
- FSOC said firms should leverage existing contractual terms or opportunities for renegotiation to transition their remaining legacy LIBOR contracts before the publication of USD LIBOR ends at the end of June, 2023.
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