The Financial Stability Oversight Council ("FSOC") interpretive guidance establishing an "activities-based approach" to address systemic risk was published in the Federal Register. The interpretive guidance will become effective on January 29, 2020.

As previously covered, FSOC will:

  • identify, evaluate and address potential risks to U.S. financial stability that arise from particular activities and seek to adopt regulations applicable to those activities, rather than making determinations relating to a single entity;
  • perform a cost-benefit analysis when considering a nonbank financial company for a potential determination under section 113 of the Dodd-Frank Act;
  • evaluate the risk of a "nonbank financial company's material financial distress" when assessing that firm for a potential designation;
  • combine the prior three-stage determination process under section 113 into two stages;
  • improve the new two-stage determination process by updating the procedure and incorporating provisions from the 2015 Supplemental Procedures;
  • clarify the post-designation "off-ramp" to rescind a determination regarding a particular company; and
  • eliminate the six-category framework outlined in the 2012 Interpretive Guidance.


Steven Lofchie

If the open-ended authority provided FSOC is not to be eliminated, at least the government is taking steps to formalize the process so that it may be applied with an even hand.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.