U.S. Department of the Treasury

The Council is charged by statute with identifying risks to the financial stability of the United States; promoting market discipline; and responding to emerging threats to the stability of the U.S. financial system.

The Council is chaired by the Secretary of the Treasury and consists of 10 voting members and 5 nonvoting members, bringing together the expertise of federal financial regulators, state regulators, and an independent insurance expert appointed by the President.

The Council brings together its members to assess, monitor, and mitigate risks to U.S. financial stability; improves communication with the public regarding these risks through reports and other publications; and facilitates cooperation and communication among member agencies on financial stability-related matters.

The Council’s annual reports outline potential emerging threats and vulnerabilities, such as financial risks related to real estate, credit, and other markets; institutional risks associated with large bank holding companies and investment funds; risks related to the structure of Treasury markets and other financial markets; cybersecurity risks; and climate-related financial risks.

In 2021, the Council identified three key priorities related to significant vulnerabilities in the financial system: nonbank financial intermediation, climate-related financial risk, and Treasury market resilience. In 2022, the Council identified a fourth key priority: risks related to digital assets. The Council has made considerable progress on each of these four priorities, as described below.

• Nonbank financial intermediation
  Nonbank financial institutions are an essential source of capital in financial markets and provide vital funding to the U.S. economy. While recognizing these benefits, the Council has identified certain vulnerabilities. The market dislocations of March 2020 further demonstrated that some nonbank financial institutions remain vulnerable and may amplify or transmit stress in the financial system.
  
  In 2021, the Council made it a priority to evaluate and address the risks to U.S. financial stability posed by three types of nonbank financial institutions: hedge funds, open-end mutual funds, and money market funds. Its progress on these efforts has included the reestablishment of the Council’s Hedge Fund Working Group, which has developed an interagency risk-monitoring framework to assess hedge fund-related risks to U.S. financial stability, and of the Nonbank Mortgage Servicing Task Force, as well as the creation of an Open-end Fund Working Group.
   
• Climate-related financial risk
  The Council identified climate change as an emerging threat to U.S. financial stability in its Report on Climate-related Financial Risk , published in October 2021. The report identified ongoing activities at Council member agencies to understand and combat climate-related financial risk. It also provided concrete recommendations for member agencies to better assess climate-related financial stability risks, enhance climate-related disclosures, improve access to and the quality of climate-related financial data, and build capacity and expertise regarding climate-related financial risk.
  
  Since the publication of the report, the Council has made considerable progress in advancing the report’s recommendations. In addition to actions taken by individual member agencies, the Council created a staff-level Climate-related Financial Risk Committee, which has served as a forum for interagency information sharing and coordination in implementing the recommendations identified in the report. The Council also created an external advisory committee, the Climate-related Financial Risk Advisory Committee, which includes members from the financial services industry, non-governmental research institutions, data and analytics providers, nonprofit organizations, and academia to improve the Council’s understanding of the impact of climate change on the financial sector.
   
• Treasury market resilience
  A deep and liquid Treasury market enables a strong U.S. economy and secure financial system, supports the U.S. dollar as the world’s reserve currency, and provides the benchmark for asset classes globally. The Council’s work to ensure the resiliency of the Treasury market includes its support for the Inter-Agency Working Group on Treasury Market Surveillance (IAWG), which has outlined steps to improve U.S. Treasury market resilience, including enhancing data quality and availability; bolstering the resilience of market intermediation; evaluating expanded central clearing; and enhancing trading venue transparency and oversight. The Council supports the IAWG’s work through the Council’s Hedge Fund Working Group, which has reviewed the ways in which hedge fund liquidation of Treasury securities and Treasury derivatives at the onset of the COVID-19 pandemic contributed to Treasury market volatility.
   
• Digital assets
  The scale of crypto-asset activities has increased significantly in recent years. In October 2022, the Council published its Report on Digital Asset Financial Stability Risks and Regulation. The report reviews the financial stability risks and regulatory gaps posed by digital assets and provides recommendations to address such risks. The report concludes that crypto-asset activities could pose risks to the stability of the U.S. financial system if their interconnections with the traditional financial system or their overall scale were to grow without adherence to or the development of appropriate regulation, including enforcement of the existing regulatory structure.

To stay up to date on the work of the Council, you can sign up for e-mail updates.