On March 25, 2026, the Financial Stability Oversight Council (the “Council”) unanimously voted to propose amendments to its interpretive guidance (the “Proposed Interpretive Guidance”) regarding the designation of nonbank financial companies as “systemically important financial institutions” (“SIFIs”) for supervision by the Board of Governors of the Federal Reserve System (the “Federal Reserve”).[1]

The Proposed Interpretive Guidance would generally reinstate the structure and substance of the Council’s 2019 revised guidance (the “2019 Interpretive Guidance”).[2] Under the Proposed Interpretive Guidance, the Council would prioritize efforts to identify, assess, and respond to potential risks to U.S. financial stability through an activities-based approach and pursue entity-specific designation only if the risk “cannot be, or is not, adequately addressed through an activities-based approach.”[3] Additionally, consistent with the 2019 Interpretive Guidance and the district court opinion in MetLife, Inc. v. Fin. Stability Oversight Council,[4] the Council would perform a cost-benefit analysis before making any designation decision and would assess the likelihood of a nonbank financial company’s material financial distress when evaluating the benefits of designation. The Proposed Interpretive Guidance would for the first time incorporate consideration of “impediments to economic growth and economic security when identifying potential risks to U.S. financial stability.”[5]

Comments on the proposal are due May 14, 2026.

Background

A.    Designation Authority

The Council[6] has authority pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank”)[7] to designate certain nonbank financial companies for supervision by the Federal Reserve and application of enhanced prudential standards. Title VIII of Dodd-Frank also grants the Council authority to designate certain payment, clearing or settlement (“PCS”) activities or financial market utilities (“FMUs”) as “systemically important.”[8]

In addition to its designation authorities, the Council may issue formal recommendations to primary financial regulatory agencies to apply standards to financial activities or practices conducted by bank holding companies or nonbank financial companies under section 120 of Dodd-Frank if the Council determines that the activity or practice could create or increase the risk of significant liquidity, credit, or other problems spreading among financial institutions and U.S. financial markets.[9]

Over the years, the guidance on SIFI designations has been updated in tandem with changes in political administrations. Shortly after the Council’s establishment, it adopted initial interpretive guidance in 2012 that outlined procedures for entity-based SIFI designations.[10] The focus of the 2012 guidance on individual designations raised competitive concerns, specifically that undesignated companies could continue to offer products and services without the additional costs imposed on designated firms. In the 2019 Interpretive Guidance, the Council adopted revised guidance that, among other things, prioritized an activities-based approach to addressing financial stability risks such that the Council would pursue entity-specific designations “only if a potential risk or threat cannot be adequately addressed through an activities-based approach.”[11] Under the 2019 Interpretive Guidance, the Council committed to evaluating the costs and benefits of SIFI designation and that it would designate a nonbank financial company only if the expected benefits justified the costs. In connection with that analysis, the Council confirmed it would specifically assess the likelihood of the nonbank financial company experiencing material financial distress.

In 2023, the Council revised its interpretive guidance (the “2023 Interpretive Guidance”) in a manner that reverted, in several significant respects, to the approach embodied in the Council’s initial 2012 guidance, including by removing (i) the prioritization of an activities-based approach, (ii) the obligation to conduct cost-benefit analysis in connection with potential nonbank designations, and (iii) the assessment of the likelihood of a company’s material financial distress prior to designation.[12] Concurrently in 2023, the Council adopted an analytic framework for identifying, assessing, and responding to financial stability risks (the “Analytic Framework”), which applies to potential nonbank financial company designations and designations of PCS activities and FMUs under Title VIII of the Dodd-Frank Act, as well as to the Council’s analyses and recommendations pursuant to section 120 of the Dodd-Frank Act.[13]

The Council previously had designated four nonbank SIFIs in 2013 and 2014[14] under the 2012 Guidance:[15] American International Group, Inc. (“AIG”), General Electric Capital Corporation (“GECC”), Prudential Financial, Inc. (“Prudential”), and MetLife, Inc. (“MetLife”), none of which currently retains that designation. MetLife’s SIFI designation was rescinded as a result of a ruling by a federal district court in litigation challenging the designation and the Council dropped its appeal following a change in administration.[16] The Council also voted to rescind the designations of GE Capital Global Holdings, LLC (the successor to GECC), AIG, and Prudential.[17]

Proposed Interpretive Guidance

The Proposed Interpretive Guidance would largely revert to the 2019 Interpretive Guidance and make several key changes from the 2023 Interpretive Guidance and Analytic Framework, including by: (1) reinstating the activities-based approach; (2) requiring the Council to conduct a cost-benefit analysis prior to designating a nonbank SIFI; and (3) updating certain concepts in the Council’s analytic methodologies.

In terms of structure, the Proposed Interpretive Guidance would mirror the 2019 Interpretive Guidance by merging the description of the Council’s SIFI designation process and its “analytic methodologies for [evaluating] financial stability risks into a single document,”[18] which would be codified in Appendix A to Part 1310 of the Council’s regulations (“Appendix A”). The Council stated it will rescind the separate Analytic Framework if the Proposed Interpretive Guidance is adopted.[19] As a procedural matter, this is significant given that the Council in 2019 adopted a rule providing that it will not amend or rescind Appendix A without providing public notice and an opportunity to comment.[20] Accordingly, if the Proposed Interpretive Guidance is adopted, the Council will not be free to depart from the substantive analytic methodologies to be incorporated into the interpretive guidance and Appendix A without first seeking notice and comment to revise the methodologies. By contrast, when it acted in 2023 to adopt the Analytic Framework as a stand-alone document apart from the interpretive guidance found in Appendix A, the Council preserved for itself the freedom to depart from the Analytic Framework if deemed necessary or advisable in identifying and assessing potential risks or carrying out a given entity-specific designation.[21] That freedom would be constrained upon adoption of the Proposed Interpretive Guidance and the corresponding elimination of the Analytic Framework as a stand-alone document.

Other notable aspects of the Proposed Interpretive Guidance are addressed below.

A.    Activities-Based Approach

The Proposed Interpretive Guidance would reintroduce the activities-based approach from the 2019 Interpretive Guidance, pursuant to which the Council would first consider the potential systemic risk of activities and pursue entity-specific designations only when a potential risk cannot be adequately addressed through the activities-based approach. Under the proposed activities-based approach, the Council would use a two-step process in consultation with other financial regulators, consistent with the process provided in the 2019 Interpretive Guidance.

1.     Step One: Identifying Potential Risks from Products, Activities or Practices

The Council would “monitor diverse financial markets and market developments on a system-wide basis to identify products, activities, or practices that could pose risks to U.S. financial stability.”[22] When monitoring potential risks, the Council would “consider the linkages across products, activities, regulations, and practices, their interconnectedness across firms and markets, and their impact on economic growth.”[23] Based on these monitoring activities, if the Council identifies a product, activity, or practice that could pose a potential “risk to U.S. financial stability,”[24] the Council would conduct an initial assessment in consultation with its constituent members, other agencies and regulators, and market participants. The Council’s initial assessment would be guided by:

(1)   triggers of potential risks (e.g., sharp reductions in the valuation of particular classes of financial assets);

(2)   how adverse effects of a potential risk may be transmitted to financial markets or participants;

(3)   the effects a potential risk could have on the financial system (e.g., the concentration and magnitude of impact on companies and markets); and

(4)   whether these effects could impair the financial system in a manner that could harm the broader U.S. economy (e.g., extension of credit to non-financial companies).[25]

2.     Step Two: Working with Regulators to Address Identified Risks

If the Council identifies a potential risk to financial stability, it would work with relevant federal and state financial regulatory agencies to address the identified potential risk. The Council expects that this engagement would range from dialogue with existing regulators regarding potential modifications to the regulation or supervision of companies or markets to the issuance of recommendations to a financial regulatory agency in the Council’s annual report.

The Proposed Interpretive Guidance would codify a process for the Council to notify an existing financial regulatory agency of the potential risk to financial stability the Council has identified and request a written response regarding the actions the agency proposes to take to address the potential risk, the anticipated effects of such actions, and the expected timeline for implementation.

The Proposed Interpretive Guidance notes that, if the Council concludes that regulators’ actions are “inadequate to address the potential risk to U.S. financial stability” after these channels of engagement, the Council retains authority under section 120 of Dodd-Frank to publicly issue nonbinding recommendations to primary financial regulatory agencies to apply new or heightened standards or safeguards for a financial activity or practice.[26]

Consistent with the 2019 Interpretive Guidance, the Council would issue recommendations under section 120 “only if it determines that the conduct, scope, nature, size, scale, concentration, or interconnectedness of the activity or practice could create or increase the risk of significant liquidity, credit, or other problems spreading among bank holding companies and nonbank financial companies or U.S. financial markets.”[27] Further, before making any recommendation under section 120, the Council must determine whether the primary financial regulatory agency “would be expected to perform a cost-benefit analysis of the actions it would take in response to the Council’s contemplated recommendation” and, if the agency would not be expected to conduct such an analysis, the Council itself must conduct the analysis.[28] If the Council conducts its own analysis, it may issue a recommendation “only if it believes that the results of its assessment of benefits and costs support the recommendation.”[29] In the event there is no primary financial regulatory agency for the relevant “markets or companies conducting financial activities or practices identified by the Council as posing risks, the Council can consider reporting to Congress on recommendations for legislation” to mitigate these risks.[30]

B.    Entity-Specific Designations

1.     Entity Designation Standards

If the Council determines that (1) the collaborative efforts undertaken in accordance with the activities-based approach described above do not “adequately address” the potential risk identified by the Council and (2) the potential threat is one that could be “effectively addressed” by a Council designation regarding one or more nonbank financial companies, the Council may proceed to evaluate one or more nonbank financial companies for an entity-specific designation.[31]

2.     Revisions to Designation Process

The Proposed Interpretive Guidance would largely reinstate key elements of the designation process from the 2019 Interpretive Guidance, with modifications noted below.

a.     Statutory Standards and Considerations

The Proposed Interpretive Guidance, consistent with the 2019 Interpretive Guidance, would clarify that “threat to the financial stability of the United States” represents the potential for “an impairment of financial intermediation or of financial market functioning…to inflict severe damage on the broader U.S. economy” for purposes of section 113.[32] The Council indicated that this formulation is intended to be more stringent than the current formulation from the Analytic Framework, which refers to “events or conditions that could‘substantially impair’ the financial system’s ability to support economic activity.”[33] The Council believes that this higher threshold is appropriate “given the number of other authorities and tools available to the Council to respond to potential risks to U.S. financial stability.”[34]

b.     Cost-Benefit Analysis

Consistent with the 2019 Interpretive Guidance, the proposal would require the Council to determine that the “expected benefits to financial stability…justify the expected costs that the determination would impose” prior to making an entity-specific designation.[35]The Council would consider potential broader benefits to the U.S. financial system and the U.S. economy, including whether the designation would lead to a “reduction in the likelihood or severity of a financial crisis,” as well as potential entity-specific benefits such as a lower cost of capital or higher credit ratings as a result of enhanced prudential standards and supervision.[36] The Proposed Interpretive Guidance indicates that “the loss of any implicit ‘too big to fail’ subsidy would be considered a benefit to the economy.”[37]

The Council also would analyze entity-specific costs, including burdens associated with enhanced risk-management requirements (e.g., capital planning and stress testing), supervision and examination, increased capital requirements, and liquidity requirements.[38] Costs to the U.S. economy more broadly also would be considered. As a proposed new element of the cost-benefit analysis, the Council would be required to consider the “potential impacts on economic growth and economic security”[39] that might arise from an entity-specific designation. Accordingly, the Council would assess the impact of the designation on the availability and cost of credit or financial products in relevant U.S. markets, as well as “the extent to which any reduction in financial services provided by the nonbank financial company under review would be offset by other market participants.”[40]

The Proposed Interpretive Guidance would also reintroduce language from the 2019 Interpretive Guidance providing that the Council would “quantify reasonably estimable benefits and costs, using ranges, as appropriate, and based on empirical data when available,” in addition to considering costs and benefits qualitatively.[41]

c.     Likelihood of Material Financial Distress

Consistent with the 2019 Interpretive Guidance, for purposes of evaluating when “material financial distress” at a nonbank financial company “could pose a threat to the financial stability of the United States,”[42] the Proposed Interpretive Guidance would require the Council to assess the likelihood of a nonbank financial company’s material financial distress. The Proposed Interpretive Guidance provides that the Council would consider a nonbank financial company’s vulnerability to a range of factors in conducting this assessment, which may include on- and off-balance sheet leverage, potential risks associated with asset reevaluations, reliance on short-term funding or “other fragile funding markets,” maturity transformation, and risks from exposures to counterparties or other market participants.[43] Under the proposal, the Council could also consider the results of any stress tests previously conducted by the company or its primary financial regulatory agency. In addition, the Council could rely on “historical examples regarding the characteristics of financial companies that have experienced financial distress, but may also consider other risks that do not have historical precedent.”[44]

d.     Proposed Pre-Designation “Off-ramp”

The Proposed Interpretive Guidance would generally maintain the existing two-stage evaluation process for entity-specific designation. In particular, consistent with the current framework, the Council first would conduct a preliminary evaluation of the nonbank financial company based on available public and regulatory information and, at the end of the first stage, may vote to commence a more detailed analysis of the company in the second stage.[45] The Proposed Interpretive Guidance would, however, introduce a new procedural step to the first stage of review that could provide an “off-ramp” for a company under review. Specifically, based on its preliminary evaluation, the Council would identify “steps a nonbank financial company or financial regulatory agencies could take to address a potential threat to U.S. financial stability,” with the expectation that “material risks to U.S. financial stability [would] be addressed within 180 days.”[46] This proposal would provide companies and relevant regulatory agencies an opportunity to “address potential threats without incurring the potentially greater compliance costs and market impacts associated with designation.”[47] Should this new process prove inadequate in addressing the identified risks and concluding the review of the company, the Council could still vote to proceed to the second stage of in-depth evaluation of the company.

C.    Analytic Methodologies

The Council has developed methodologies, currently codified in the Analytic Framework, that would be employed “in both designation and non-designation contexts” and would help the Council evaluate potential risks to financial stability, including in the context of nonbank SIFI designation, PCS activity and FMU designation, and analyses and recommendations under section 120 of Dodd-Frank.[48]

The Proposed Interpretive Guidance, in subsuming the Analytic Framework, would revise the list of vulnerabilities enumerated in the Analytic Framework to remove “destabilizing activities,” a vulnerability that was added when the Analytic Framework was adopted in 2023. That vulnerability was intended to capture “activities [that], by their nature…can destabilize markets for particular types of financial instruments or impair financial institutions,” including “activities that involve moral hazard or conflicts of interest.”[49] The Council explained in the proposal that “this vulnerability was not clearly defined [in the Analytic Framework] and relied on circular reasoning.”[50] The Council noted that the “mere presence of any single vulnerability does not indicate that a risk to U.S. financial stability exists.”[51] The proposal provides that, instead, the Council would focus on assessing the risk associated with one or more vulnerabilities in the financial system.

As a complement to the Council’s proposed consideration of impediments to economic growth and economic security as a new factor in the evaluation of financial stability risks, the Council would “work[] with member agencies to consider whether elements of the U.S. financial regulatory framework are fit for purpose or impose undue burdens that could constrain economic growth, thereby posing a potential risk to U.S. financial stability.”[52] This element of the revised analytic methodology is also reflected in the Proposed Interpretive Guidance’s approach to cost-benefit analysis, which would require the Council to consider the “potential impacts on economic growth and economic security” from a designation,[53] with the recognition that “economic security requires that the U.S. financial system reliably provide the resources necessary to grow the real economy” and “that economic security and financial stability can both be bolstered by encouraging technological innovation in the financial system and by modernizing financial regulation.”[54]

In terms of scope, the Proposed Interpretive Guidance would codify the analytic methodologies as a distinct section of its guidance on nonbank SIFI designations and, unlike the current Analytic Framework, would not specifically reference applying these methodologies in the context of potential PCS activity or FMU designations.[55]

A comparison of the list of vulnerabilities currently contained in the Analytic Framework with those in the proposal is summarized below.

Vulnerability	Potential Contribution to Systemic Risk	Current Framework	Proposal
Leverage	Leverage can amplify risks by reducing market participants’ ability to satisfy their obligations and by increasing the potential for sudden liquidity strains.	Yes	Yes
Liquidity risk and maturity mismatch	A shortfall of sufficient liquidity to satisfy short-term needs, or reliance on short-term liabilities to finance longer-term assets, can subject market participants to rollover or refinancing risk. These risks may force entities to sell assets rapidly at stressed market prices, which can contribute to broader stresses.	Yes	Yes
Asset Valuations	Sharp reductions in the valuation of particular assets or classes of assets can result in significant losses for financial market participants that hold or are otherwise exposed to those assets.	No	Newly added[56]
Interconnections	Direct or indirect financial interconnections, such as exposures of creditors, counterparties, investors, and borrowers, can increase the potential negative effect of dislocations or financial distress.	Yes	Yes
Operational risks	Risks can arise from the impairment or failure of financial market infrastructures, processes, or systems, including due to cybersecurity vulnerabilities.	Yes	Yes
Complexity or opacity	Complexity and opacity can manifest themselves in the number of jurisdictions in which activities are conducted, the number of affiliates of a particular company, and the extent of intercompany or interaffiliate dependencies for liquidity, funding, operations, and risk management, all of which make it more difficult for regulators, counterparties, and other stakeholders to assess potential risks to financial stability.	Yes	Yes
Inadequate risk management	An absence of appropriate regulatory authority and requirements can exacerbate a potential risk.	Yes	Yes
Concentration	A risk may be amplified if financial exposures or important services are highly concentrated in a small number of entities, creating a risk of widespread losses or the risk that the service could not be replaced in a timely manner at a similar price and volume if existing providers withdrew from the market.	Yes	Yes
Impediments to economic growth and economic security	Given that economic growth and economic security are important considerations related to financial stability, circumstances or developments that negatively impact economic growth or economic security could undermine financial stability.	No	Newly added
Destabilizing activities	Certain activities, by their nature, particularly those that are sizeable and interconnected with the financial system, can destabilize markets for particular types of financial instruments or impair financial institutions. This risk may arise even when those activities are intentional and permitted by applicable law, such as trading practices that substantially increase volatility in one or more financial markets, or activities that involve moral hazard or conflicts of interest that result in the creation and transmission of significant risks.[57]	Yes	Removed

D.    Implications

The Proposed Interpretive Guidance would reestablish the primacy of an activities-based approach and reintroduce both cost-benefit analysis and the assessment of the likelihood of a company’s material financial distress as prerequisites to any nonbank SIFI designation, consistent with the 2019 Interpretive Guidance. Taken together, the proposed changes suggest a more constrained approach to entity-specific designations, with greater emphasis on interagency coordination and the use of existing regulatory tools before resorting to designation. The proposed reinstatement of a higher threshold for what constitutes a “threat to the financial stability of the United States,” along with the introduction of an “off-ramp” during the preliminary evaluation stage of entity-specific designation, further suggests a preference for mitigating risks without imposing the full consequences of entity-specific designation where possible.

At the same time, the Proposed Interpretive Guidance underscores the Council’s continued focus on monitoring system-wide vulnerabilities, including through updated methodologies that incorporate considerations of economic growth and economic security. Although the return to an activities-based approach should reduce the likelihood of near-term entity-specific designations, the Council would retain broad authority to pursue entity-specific designations where risks are not adequately addressed through existing regulatory channels.

The Proposed Interpretive Guidance also suggests that, notwithstanding the reduced emphasis on entity-specific designations, particular financial activities or practices may be subject to heightened scrutiny as market conditions evolve. Consistent with the reinstated activities-based approach, the Council is likely to continue monitoring emerging risks across markets and may use its annual report, interagency coordination processes, and, where appropriate, section 120 recommendations to highlight or respond to areas of concern. Although the Proposed Interpretive Guidance does not identify specific sectors or activities as presenting heightened risks, the Council may continue to assess developments in nonbank financial intermediation and signal areas of particular focus through future public releases.[58] Accordingly, firms should continue to monitor developments at the Council, including published minutes[59] and readouts[60] from the Council’s periodic meetings and its annual report and public statements, for indications of evolving priorities or areas of potential policy focus moving forward.

In terms of specific designation actions, the Proposed Interpretive Guidance makes individual nonbank SIFI designations less likely than under the 2023 Interpretive Guidance. Nonetheless, in view of the absence of any such designations since 2014 (and the rescission of all four previous designations), specific designations appeared unlikely even under the 2023 Interpretive Guidance.

ENDNOTES

[1] Notice of Proposed Interpretive Guidance, Authority to Require Supervision and Regulation of Certain Nonbank Financial Companies, 91 Fed. Reg. 15,551 (Mar. 30, 2026), available at: https://www.govinfo.gov/‌content/pkg/FR-2026-03-30/pdf/2026-06114.pdf.

[2] Authority to Require Supervision and Regulation of Certain Nonbank Financial Companies, Financial Stability Oversight Council, 84 Fed. Reg. 71,740 (Dec. 30, 2019), available at: https://www.govinfo.gov/‌content/pkg/FR-2019-12-30/pdf/2019-27108.pdf. The 2019 Interpretive Guidance is discussed in FSOC Finalizes Changes to Nonbank SIFI Designation Guidance, Sullivan & Cromwell (Jan. 2, 2020), available at: https://www.sullcrom.com/SullivanCromwell/_Assets/PDFs/Memos/SC-Publication-FSOC-Finalizes-Nonbank-SIFI-Designation-Guidance.pdf (the “2019 Client Memorandum”).

[3] Proposed Interpretive Guidance, p. 15,552.

[4] 177 F. Supp. 3d 219 (D.D.C. 2016) (holding that the Council had failed to evaluate the likelihood of MetLife’s material financial distress; adequately specify and quantify the causal connection between MetLife’s potential distress and the threat to financial stability; and consider the costs to MetLife from the designation).

[5] Proposed Interpretive Guidance, p. 15,552. Relatedly, in its 2025 Annual Report, the Council noted that maintaining U.S. financial stability “requires and is interdependent with” sustainable long-term economic growth and economic security. 2025 Annual Report, Financial Stability Oversight Council (Dec. 11, 2025), available at: https://home.treasury.gov/system/files/261/FSOC2025AnnualReport.pdf.

[6] The voting members of the Council are the Secretary of the Treasury, the Chairman of the Federal Reserve, the Comptroller of the Currency, the Director of the Bureau of Consumer Financial Protection, the Chairman of the Securities and Exchange Commission, the Chairperson of the Federal Deposit Insurance Corporation, the Chairperson of the Commodity Futures Trading Commission, the Director of the Federal Housing Finance Agency, the Chairman of the National Credit Union Administration Board, and an independent member with insurance expertise who is appointed by the President and confirmed by the Senate. There are also five non-voting members representing the Federal Insurance Office, the Office of Financial Research and state banking, insurance, and securities regulators.

[7] 12 U.S.C. § 5301 et seq.

[8] Specifically, the Council has authority to designate an FMU or PCS activity as systemically important in the event “the failure of or a disruption to the financial market utility or payment, clearing, or settlement activity” could cause or exacerbate significant liquidity or credit problems that propagate across financial institutions or markets and, in turn, threaten the stability of the U.S. financial system. 12 U.S.C. § 5463. Currently, there are eight designated systemically important FMUs. See U.S. Department of the Treasury, Designations, available at: https://home.treasury.gov/policy-issues/financial-markets-financial-institutions-and-fiscal-service/fsoc/designations (“Council Designations”).

[9] In addition, one of the duties of the Council set forth in section 112 of Dodd-Frank is to make recommendations to primary financial regulatory agencies to apply new or heightened standards and safeguards for financial activities or practices that could create or increase risks of significant liquidity, credit, or other problems spreading among financial markets and companies.

[10] Authority To Require Supervision and Regulation of Certain Nonbank Financial Companies, Financial Stability Oversight Council, 77 Fed. Reg. 21,637 (Apr. 11, 2012), available at: https://www.govinfo.gov/‌content/pkg/FR-2012-04-11/pdf/2012-8627.pdf.

[11] 2019 Interpretive Guidance, p. 71,742.

[12] Guidance on Nonbank Financial Company Determinations, Financial Stability Oversight Council, 88 Fed. Reg. 80,110 (Nov. 17, 2023), available at: https://www.govinfo.gov/content/pkg/FR-2023-11-17/pdf/2023-25053.pdf.

[13] Analytic Framework for Financial Stability Risk Identification, Assessment, and Response, Financial Stability Oversight Council, 88 Fed. Reg. 78,026 (Nov. 14, 2023), available at: https://www.govinfo.gov/‌content/pkg/FR-2023-11-14/pdf/2023-25055.pdf. The 2023 Interpretive Guidance and Analytic Framework are discussed in Financial Stability Oversight Council Finalizes Revised Guidance on Nonbank SIFI Designations, Sullivan & Cromwell (Nov. 9, 2023), available at:https://www.sullcrom.com/insights/memo/2023/November/‌FSOC-Finalizes-Revised-Guidance-Nonbank-SIFI-Designations.

[14] See Council Designations.

[15] The Council has also in the past taken public steps related to its evaluation of potential systemic risks arising from asset management products and activities, including by commissioning a 2013 report by the Office of Financial Research. The Council ultimately did not pursue action under its authority to designate nonbank SIFIs or its section 120 recommendation authority, but did issue in April 2016 a public statement on its review of potential risks to U.S. financial stability that may arise from asset management products and activities. For further information, see our client memorandum, Asset Management and Financial Stability: Financial Stability Oversight Council Publishes Statement on Asset Management; Focuses on Liquidity, Leverage; Creates “Interagency Working Group” on Hedge Fund Leverage, Sullivan & Cromwell (Apr. 25, 2016), available at: https://www.sullcrom.com/insights/memo/2016/April/Asset-Management-and-Financial-Stability.

[16] MetLife, Inc. v. Fin. Stability Oversight Council, 177 F. Supp. 3d 219 (D.D.C. 2016).

[17] See Basis for the Financial Stability Oversight Council’s Rescission of its Determination Regarding GE Capital Global Holdings, LLC (June 28, 2016), available at: https://home.treasury.gov/system/files/261/‌GE%20Captial%20Global%20Holdings%2C%20LLC%20%28Recission%29.pdf; Notice and Explanation of the Basis for the Financial Stability Oversight Council’s Rescission of Its Determination Regarding American International Group, Inc. (AIG) (Sept. 29, 2017), available at: https://home.treasury.gov/system/files/261/‌American%20International%20Group%2C%20Inc.%20%28Rescission%29.pdf; Notice and Explanation of the Basis for the Financial Stability Oversight Council’s Rescission of Its Determination Regarding Prudential Financial, Inc. (Prudential) (Oct. 16, 2018), available at: https://home.treasury.gov/system/files/261/‌Prudential-Financial-Inc-Rescission.pdf. For further discussion of the prior SIFI designations, see our 2019 Client Memorandum.

[18] Proposed Interpretive Guidance, p. 15,552.

[19] Id.

[20] 12 C.F.R. § 1310.3. 2023 Interpretive Guidance, p. 80,127. Similarly, the 2019 Interpretive Guidance states that the Council “will not amend or rescind its interpretive guidance on nonbank financial company determinations without soliciting public notice and comment.” See 2019 Interpretive Guidance, p. 71,759.

[21] Indeed, the Council specifically noted that “other Council materials, including documents that are referred to in but are not a part of the Final Guidance, such as the Council’s separately issued Analytic Framework…are not subject to section 1310.3’s requirements” for public notice and an opportunity to comment. See 2023 Interpretive Guidance, p. 80,127.

[22] Proposed Interpretive Guidance, p. 15,561.

[23] Id.

[24] Id., p. 15,554. The Council views a “risk to U.S. financial stability” as “the potential for an event, act, or development that could impair financial intermediation or financial market functioning to a degree that would be sufficient to inflict significant damage on the broader U.S. economy.” The Proposed Interpretive Guidance clarifies that such an “event, act, or development” is “distinct from the vulnerabilities through which such risks may propagate.” Id.

[25] Id.

[26] Id., p. 15,562. The Council “intends to make recommendations to an agency under section 120 only to the extent that its recommendations are consistent with the statutory mandate of the primary financial regulatory agency to which the Council is making the recommendation.” Id.

[27] Id.

[28] Id.

[29] Id.

[30] Id.

[31] Id.

[32] Id., p. 15,553 (emphasis added).

[33] Id. (emphasis added).

[34] Id., p. 15,556.

[35] Id., p. 15,563.

[36] Id.

[37] Id.

[38] The Proposed Interpretive Guidance notes that, because the Federal Reserve is required to tailor its prudential standards to nonbank financial companies following a designation, any new requirements resulting from the Council’s designation “will not be known to the Council during its analysis of the company.” Accordingly, where the company under review “primarily engages in bank-like activities,” the Proposed Interpretive Guidance provides that the Council may consider, “as a proxy, the costs that would be imposed on the nonbank if the Federal Reserve imposed prudential standards similar to those imposed on bank holding companies with at least $250 billion in total consolidated assets under section 165 of the Dodd-Frank Act.” It is not clear what implications, if any, the use of the $250 billion level has for the current review of more tailored requirements for larger bank holding companies.

[39] Proposed Interpretive Guidance, p. 15,563.

[40] Id., p. 15,564.

[41] Id., p. 15,563.

[42] 12 U.S.C. § 5323.

[43] Proposed Interpretive Guidance, p. 15,564.

[44] Id.

[45] Id., p. 15,565.

[46] Id., p. 15,564-65.

[47] Id., p. 15,559.

[48] Id., p. 15,553.

[49] Analytic Framework, p. 78,034.

[50] Proposed Interpretive Guidance, p. 15,553.

[51] Id., p. 15,560.

[52] Id.

[53] Id., p. 15,555.

[54] Id., p. 15,553.

[55] The Proposed Interpretive Guidance does not significantly revise the Analytic Framework’s treatment of the “transmission channels” that the Council considers, in conjunction with the above “vulnerabilities,” when assessing how the adverse effects of potential risks to U.S. financial stability could be transmitted to financial markets or market participants. The current and proposed transmission channels are exposure, asset liquidation, critical function or service, and contagion. Id., p. 15,560-61.

[56] The underlying concerns of the asset valuations vulnerability are also addressed in the Council’s consideration of the exposure and asset liquidation transmission channels. Therefore, its inclusion in the list of vulnerabilities in the Proposed Interpretive Guidance is less a novel concept and more a reinforcement of the Council’s existing focus on the risks posed by changes in asset valuations.

[57] Analytic Framework, p. 78,034.

[58] The Council has, in the past, identified specific sectors as posing “vulnerabilities.” See, e.g., 2024 Annual Report, Financial Stability Oversight Council (Dec. 6, 2024), available at: https://home.treasury.gov/system/‌files/261/FSOC2024AnnualReport.pdf(discussing, for example, short-term funding markets, private credit and other investment funds, nonbank mortgage servicers, commercial real estate, and digital assets).

[59] The most recent minutes can be found at Minutes of the Financial Stability Oversight Council (Dec. 11, 2025), available at: https://home.treasury.gov/system/files/261/FSOC-20251211-Minutes.pdf.

[60] The most recent readout can be found at Readout: Financial Stability Oversight Council Meeting on March 25, 2026 (Mar. 25, 2026), available at: https://home.treasury.gov/system/files/261/FSOC-20260325-Readout.pdf.

This post is based on a Sullivan & Cromwell LLP memorandum, “Financial Stability Oversight Council Proposes Changes to Nonbank SIFI Designation Guidance,” dated April 8, 2026, and available here.