The Financial Stability Oversight Council on Friday proposed guidance to make it easier to designate non-bank financial institutions for regulatory supervision and new procedures to better identify and respond to financial system risks, Reuters reported. The multi-regulator council charged with policing stability risks in the financial system released the proposals for public comment just over a month after two regional bank failures sparked the biggest contagion threat since the 2008 financial crisis. U.S. Treasury Secretary Janet Yellen has raised concerns about non-bank financial institutions, including hedge funds, private equity firms and pension funds as a potential source of financial instability because of a lack of supervision. She said in remarks to the FSOC's meeting that the banking system remains sound, but "we continue to be vigilant and monitor conditions closely." But the banking sector turmoil showed that showed financial regulators' "work is not done" and supervisory and regulatory changes are needed "to help prevent financial disruptions from starting and spreading in the first place," Yellen said. FSOC, chaired by Yellen and including Federal Reserve Chair Jerome Powell and head of other major financial regulators, was granted the ability to designate non-bank firms as systemically important, but this was made more difficult in 2019 with changes made under the Trump administration.
