House Committee Advances FSOC Reform Bill
Commentary by Steven Lofchie
The House Financial Services Committee ("HFS") advanced a bill requiring the Financial Stability Oversight Council ("FSOC") to "consider alternative approaches" before designating a U.S. nonbank financial company for Federal Reserve supervision.
By a vote of 47-4, the HFS reported out H.R. 3682, cited as the "Financial Stability Oversight Council Improvement Act of 2025" to the full House of Representatives. The bill would amend the Financial Stability Act to ensure that FSOC consults with primary regulators and evaluates other regulatory tools before designating a nonbank financial company as a Systemically Important Financial Institution ("SIFI").
Commentary
It would be better if the relevant law was simply repealed. The notion that a group of regulators may decide to regulate a previously unregulated institution as if it were a bank or bank holding company is wholly nonsensical. Banking regulation is designed for banks. Slapping bank regulation on an entity that is not a bank makes about as much sense as slapping airline regulation on a trucking company.
This is to say nothing of the fact that the power given the various regulators under the relevant statute is completely undefined. (See, e.g., this 2014 news story: Representative Garrett Questions the SIFI Designation Authority Granted to FSOC by Dodd-Frank.)