On December 11, the Treasury announced the approval of the Financial Stability Oversight Council’s (FSOC) annual report, marking a significant shift in the council’s approach to financial stability oversight. In remarks accompanying the report, Treasury Secretary Scott Bessent emphasized that the FSOC is now prioritizing economic growth and economic security as the foundations of financial stability, departing from prior frameworks that broadly labeled many sectors and institutions as vulnerabilities. The FSOC’s 2025 report identified four main priorities for the coming year: (i) strengthening the resilience of the Treasury market; (ii) addressing evolving cyber risks; (iii) modernizing supervisory and regulatory frameworks for depository institutions; and (iv) harnessing AI to enhance the stability of the financial system.

Further, the report detailed recent market developments, including the resilience of core financial markets and institutions during periods of volatility, and noted the stabilization in the commercial real estate market. The report supported ongoing reforms such as the implementation of a central clearing mandate for Treasurys and the finalization of changes to the enhanced supplementary leverage ratio (covered by InfoBytes here). Finally, the report recommended continued monitoring of market developments in digital assets, payment stablecoins, and nonbank mortgage companies, among other sectors, while urging Congress to provide the FHFA with adequate authority over third-party service providers.

Comptroller of the Currency Jonathan Gould, an FSOC member, discussed bank supervision and regulation at the meeting, noting that financial regulation has hindered economic growth and innovation by imposing excessive burdens on banks. He highlighted recent and ongoing OCC initiatives to tailor supervision to the risk profiles of banking institutions, promote responsible innovation, and bolster de novo chartering.