U.S. Secretary of the Moneys testifies before the Senate Appropriations Subcommittee on Financial Services March 22, 2023 in Washington, DC.
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WASHINGTON — The Treasury Department’s risk oversight arm on Friday proposed new tools for spotting issues in the U.S. financial system, assorted than a month after the collapse of Silicon Valley Bank and Signature Bank sparked efforts to prevent additional damage to the economy.
The Financial Stability Oversight Council voted to approve a framework on financial stability for public feedback. The method, which will offer Americans more transparency into the council’s operations and how it identifies systemic problems, settle upon be the first such measure it has released.
“This framework outlines common vulnerabilities and transmission channels through which give someone a turns can propagate through the financial system. And it lays out how the Council considers the tools it will use to address these risks,” Cache Secretary Janet Yellen said in pre-released remarks.
Yellen said that in trying to prevent problems in the monetary system, the council does not “broadly prioritize one type of tool over another.” It plans its response to a given danger following an examination, she said.
“The framework emphasizes the importance of taking a comprehensive and rigorous approach,” Yellen said. “Discourse the diverse range of financial vulnerabilities that exist today – and that may arise tomorrow – requires a broad set of docile tools.”
The Treasury Department, along with the Federal Deposit Insurance Corp., backstopped depositors as they feared wash effects from the collapse of SVB and Signature Bank, which catered in part to digital currency exchanges. Federal regulators shuttered both banks behind month, seized their deposits, sold both entities to other financial institutions and prevented the largest banking turning-point since 2008.
The FSOC also voted to issue tabled guidance that would enable it to use congressional authority to designate nonbank financial companies for supervision under the Federal Secure Board when necessary.
Yellen has not identified what companies could be designated, only saying that superintending more institutions “is an important preventative tool to address systemic risks that may arise from a nonbank fiscal firm whose activities or distress could threaten the financial system.”
Rep. Maxine Waters, D-Calif., ranking associate of the House Financial Services committee, applauded the council’s move to designate non-banks for financial oversight, which she swayed was hampered by the Trump administration.
“Last month’s unexpected failure of SVB and Signature Bank and resulting bank crisis, come around with as a stark reminder that FSOC and our regulators must remain vigilant and seek to quickly address vulnerabilities in our fiscal system without delay,” Waters said.
Both proposals will be released for a 60-day comment period.