Technical corrections only. The differences between v3 and v4 are limited to updates in the legislative status (Engrossed in House vs. Referred in Senate) and the attesting clerk's name. There are no substantive policy changes in the bill text itself.
Financial Stability Oversight Council Improvement Act of 2025
- Sponsor
- Rep. Foster, Bill [D-IL-11]
- Committees
- Banking, Housing, and Urban Affairs Committee (primary)
- Last action
- Feb 11, 2026
Bottom line
The bill adds a procedural hurdle for FSOC's designation of nonbank financial companies, emphasizing a preference for less stringent regulatory actions before imposing Federal Reserve oversight.
What it actually does
This bill amends the Financial Stability Act of 2010 to require the Financial Stability Oversight Council (FSOC) to first consider less intrusive alternative actions before designating a U.S. nonbank financial company as systemically important, which would subject it to Federal Reserve supervision. It mandates consultation with the company and its primary regulator to determine if other measures, such as new standards or a company-submitted plan, are insufficient to mitigate financial stability threats. The bill also makes a conforming amendment to FSOC's public notice requirements.
Proponents argue
Proponents argue this bill introduces a necessary check on FSOC's power, ensuring that the Council exhausts less burdensome regulatory options before imposing Federal Reserve supervision on nonbank financial companies. They contend it promotes regulatory efficiency and prevents overreach, allowing companies to address potential risks proactively without immediate, broad federal oversight, thereby fostering innovation and competition in the financial sector.
Opponents contend
Opponents might argue that this bill could weaken FSOC's ability to act swiftly and decisively in identifying and mitigating systemic risks posed by nonbank financial companies. They may contend that adding procedural delays could allow risks to fester, potentially jeopardizing financial stability, and that the existing framework already provides sufficient consultation and due process.
The bill text is very short and can be read quickly, but understanding its implications requires familiarity with financial regulatory frameworks and the role of FSOC.
Section 2(1)(B) and Section 2(2) of H.R. 3682, amending Section 113(a) and (f)(1) of the Financial Stability Act of 2010.
Requirement for FSOC to Consider Alternative Actions Before Nonbank SIFI Designation
Before the Financial Stability Oversight Council (FSOC) can vote to designate a U.S. nonbank financial company as systemically important (meaning it would be supervised by the Federal Reserve), this provision requires FSOC to first consult with the company and its primary regulator. During this consultation, FSOC must determine that other less severe actions, such as applying new or stricter standards, or a plan proposed by the company itself, are not enough to address the potential threat the company poses to the financial stability of the United States. A conforming amendment ensures this new requirement is included in FSOC's public notice and hearing considerations.
Supporters argue
Supporters argue this provision ensures a more tailored and less disruptive approach to financial regulation. They believe it encourages collaboration between regulators and companies, allowing for market-based solutions and preventing the unnecessary application of bank-like regulations to diverse nonbank entities, which could stifle innovation and competitiveness.
Critics contend
Critics might contend that this provision could introduce undue delays and create loopholes in the SIFI designation process, potentially allowing nonbank risks to grow unchecked. They argue that FSOC's ability to act decisively is crucial for maintaining financial stability, and this amendment could complicate efforts to address emerging threats effectively.
Tradeoffs
The provision balances the desire for regulatory efficiency and avoiding overreach on nonbank financial companies against the need for swift and decisive action to mitigate systemic risks. It creates a tension between regulatory flexibility and the potential for delayed intervention in critical situations.
The bill explicitly mentions 'the application of new or heightened standards and safeguards under section 120' as an alternative action FSOC must consider before SIFI designation.
Section 2(1)(B) of H.R. 3682, amending Section 113(a)(3) of the Financial Stability Act of 2010.
Why it matters:This is standard legislative practice to reference existing law rather than reprinting it. It is not intentionally evasive.
Case for: Proponents would argue that referencing Section 120 highlights that less severe, tailored regulatory tools already exist and should be prioritized. It emphasizes that enhanced prudential standards, rather than full Federal Reserve supervision, might be sufficient for some companies.
Case against: Opponents might argue that by explicitly pointing to Section 120, the bill subtly encourages a preference for these standards over full SIFI designation, potentially limiting FSOC's discretion and tools for comprehensive systemic risk management.
Estimated impact: This reference reinforces the range of regulatory tools available to FSOC and the Federal Reserve, potentially shifting the default approach towards applying specific standards rather than broad supervision for nonbank entities.