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The Financial Stability Oversight Council (FSOC) – which includes leaders from financial agencies, including NCUA Chairman Todd Harper – met Friday and unanimously approved issuing for public comment a proposed analytical framework for financial stability risks, as well as proposed interpretive guidance on supervision and enhanced prudential standards for certain nonbank financial companies.

The council indicated the actions are an effort to enhance its ability to address financial stability risks, provide transparency on how it performs its duties, and ensure a rigorous and transparent designation process.

The proposed framework outlines FSOC’s approach to identifying, assessing, and responding to potential risks to U.S. financial stability, regardless of whether those risks arise from activities, individual firms, or otherwise. The council noted it will not impose obligations on entities, but rather help market participants, stakeholders, and the public better understand how FSOC performs its duties.

The proposed interpretive guidance would update previous guidance related to how the council evaluates and analyzes whether a nonbank financial company should be subject to Federal Reserve supervision and prudential standards. The Dodd-Frank Act authorized FSOC to make that designation if the council determines that material financial distress at the company, or the nature, scope, size, scale, concentration, interconnectedness, or mix of the activities of the company, could pose a threat to U.S. financial stability.

The two proposals will be available for a 60-day public comment period following their publication in the Federal Register.

NAFCU has called on the CFPB, which is also a member of FSOC, to pursue additional oversight and supervision of nonbanks that may be skirting the law or regulations and posing risks to consumers. The association will continue to advocate for appropriate oversight of nonbank entities to ensure a level playing field and protect against risky practices.