WASHINGTON – The Financial Stability Oversight Council (Council) today unanimously approved its 2025 annual report. This report presents the Council’s assessment of the most salient financial stability issues, provides the Council’s recommendations to address those issues, and summarizes the activities of the Council and member agencies to address potential emerging threats to U.S. financial stability. The report was developed collaboratively by Council members and their agencies and staffs. Overall, the Council finds that U.S. financial markets and institutions functioned effectively in 2025, supporting the smooth provision of credit to businesses and households and facilitating asset price discovery.
“Since the first day of this Administration, we have focused on building Parallel Prosperity—an era of economic expansion where Wall Street and Main Street grow together,” Secretary of the Treasury Scott Bessent said. “To that end, we have tirelessly pursued pro-growth policies to help unlock the potential available to all Americans when they are free to save, invest, innovate, build businesses, and drive their own economic destinies. It is my firm belief that the Financial Stability Oversight Council plays an important role in ensuring that the financial system is contributing to this vision.”
Given the wide range of topics relevant to financial stability, this year’s report has been restructured to highlight the Council’s priority areas of focus, each of which is accompanied by actionable policy recommendations. These areas and associated recommendations include the following.
Bolstering Treasury Market Resilience: The U.S. Treasury market is the deepest and most liquid market in the world, with a unique role underpinning financial activity across the domestic and global economies, which underscores the importance of continuing to bolster its resilience. As such, the Council strongly supports the continued work of the Inter-Agency Working Group on Treasury Market Surveillance (IAWG) and encourages member agencies to use the Council’s new Market Resilience Working Group as an additional forum to monitor and analyze resilience-boosting initiatives in the Treasury market. Additionally, the Council supports the Securities and Exchange Commission in its efforts to implement a central clearing mandate for Treasuries and endorses banking agencies’ recent finalization of a rule amending the enhanced supplementary leverage ratio, which should help improve Treasury market intermediation capacity. Finally, the Council recommends close monitoring of market developments, such as the potential entry of new Treasury central counterparties and implementation of the Guiding and Establishing National Innovation for U.S. Stablecoins (GENIUS) Act, to better understand related impacts on Treasury market structure, functioning, and demand.
Addressing Cyber Risk and Navigating an Evolving Threat Landscape: The cyber threat landscape continues to evolve rapidly, with nation-state actors and sophisticated criminal groups continuing to target financial institutions and critical financial infrastructure. The Council recommends that member agencies continue to expand joint monitoring and information sharing efforts among regulators and industry stakeholders and endorses the increased use of scenario-driven tabletop exercises to help bolster preparedness for cyber incidents. To proactively expand cyber defense capabilities, the Council endorses increased public sector usage of artificial intelligence (AI) and engagement with regulated private sector entities to encourage development of similar capabilities. Further, the Council encourages federal banking regulators to continue coordination of third-party service provider examinations, expand collaborative outreach with state regulators, and identify additional ways to support information sharing among state and federal regulators. The Council recommends that Congress pass legislation to ensure that the Federal Housing Finance Agency has adequate examination and enforcement powers to manage the risks associated with services provided by third parties to its regulated entities. Finally, the Council encourages public and financial services sector partners to consider the cryptographic risks of quantum computers and their impact on the future cyber risk landscape, and to take appropriate steps to facilitate the migration to quantum-resistant encryption technologies.
Enhancing Supervisory and Regulatory Frameworks for Depository Institutions: An appropriately regulated and supervised banking system is critical to financial stability. Therefore, the Council endorses proposals and actions taken by banking agencies and the National Credit Union Administration in 2025 to enhance supervision and regulation of banks and credit unions and encourages consideration of new proposals and guidance to further modernize these frameworks, enhance transparency, reduce unnecessary regulatory burden, and better align regulatory treatment to avoid market distortions. Finally, the Council supports recent efforts by banking agencies to recalibrate regulatory and supervisory expectations, clearly define “unsafe or unsound practice” for supervisory and enforcement purposes, and reduce compliance costs for community banks.
Harnessing Artificial Intelligence to Promote Financial Stability: Recent technological advances have spurred a significant increase in AI adoption. Financial institutions are using AI for many purposes and, similarly, financial regulatory bodies are exploring AI’s use in supervision and regulation. Going forward, the Council recommends that member agencies use its Artificial Intelligence Working Group to explore opportunities for AI to promote the resilience of the financial system, while also monitoring for potential risks to financial stability that might be posed by the adoption of AI both within and outside the financial services sector. The Council also endorses continued cooperation by the Treasury Department, the Financial and Banking Information Infrastructure Committee, and the Financial Services Sector Coordinating Council on these issues. Finally, the Council supports continued engagement with international counterparts concerned with the use of AI in financial services.
The full report can be viewed here.
Secretary Bessent’s remarks on the report during the open session can be viewed here.