Kristen Malinconico
Senior Director, Center for Capital Markets Competitiveness, U.S. Chamber of Commerce
Published
March 25, 2026
Whether you call it “ping-pong,” “whiplash” or a “pendulum swing,” the every-four-year change in the Financial Stability Oversight Council’s (FSOC) nonbank systemic risk guidance creates unnecessary uncertainty for financial companies.
FSOC has several tools to address potential threats to the financial system, including direct nonbank engagement, coordination with primary regulators, and designating nonbanks as Systemically Important Financial Institutions (SIFIs) under the supervision of the Federal Reserve.
FSOC’s mission is to mitigate systemic risks, not to prioritize SIFI designations as a metric of success. Designations without clear systemic risk justifications undermine our capital markets’ competitiveness and increases vulnerability to economic shocks. Given the threat of being regulated like a bank, nonbanks afraid to grow will innovate less, and consumers could face higher costs and see fewer new financial products.
Unfortunately, FSOC adopted new guidance in 2023 that makes designations easier, overriding the 2019 Guidance that prioritized an activities-based approach to systemic risk (focused on regulating specific financial activities on a system-wide basis) and instituted strong due process provisions requiring a cost-benefit analysis and an assessment of the likelihood of a nonbank’s financial distress before making a designation. The 2019 provisions are the result of lessons learned from FSOC designations in the 2010s and the 2016 MetLife court decision that criticized FSOC’s flawed approach and failure to conduct a cost-benefit analysis.
Restoring the 2019 Guidance: A Step Towards Regulatory Durability
Today, the current Council is anticipated to release a proposal amending nonbank guidance. Returning to the 2019 Guidance would restore balance between FSOC’s authority to evaluate nonbank stability, while ensuring nonbanks receive essential due process if under consideration for heightened supervision. By returning to the 2019 Guidance, designation would again rightfully be a tool of last resort.
Congress Must Provide Statutory Stability
Returning to the 2019 Guidance is insufficient if a future administration decides to reverse it. Fortunately, there is widespread agreement in Congress that designation should be a tool of last resort.
The House of Representatives has already taken a significant step forward to end FSOC’s nonbank guidance ping-pong by passing H.R. 3682, the FSOC Improvement Act, championed by Representatives Bill Foster (D-IL) and Bill Huizenga (R-MI), earlier this year.
Now is time for the Senate to pass its companion bill, S. 3578, led by Senators Rounds (R-SD), Peters (D-MI), Gallego (D-AZ), and McCormick (R-PA) to restore common-sense guidance to FSOC nonbank designation, ensuring our capital markets continue to thrive.
About the author
Kristen Malinconico
Kristen Malinconico is Senior Director for the U.S. Chamber of Commerce’s Center for Capital Markets Competitiveness. She leads the Center’s portfolios for asset management, derivatives, and fiduciary issues.
