The United States will tighten rules for non-banking companies

US Treasury Secretary Janet Yellen has raised concerns about non-bank financial institutions, including hedge funds, venture capital firms and pension funds, as a potential source of financial instability due to a lack of oversight.

Speaking at the FSOC meeting, he said the banking system remains healthy, but we “remain vigilant and monitor conditions closely.”

But he added that the turmoil in the banking sector showed that “mission is not done” for financial regulators and that supervisory and regulatory changes were needed “to help prevent financial turmoil from starting and spreading in the first place”.

The FSOC, which Yellen chairs and includes Federal Reserve Chairman Jerome Powell and the heads of other major financial regulators, was given the ability to designate non-bank institutions as systemically important, but this became difficult in 2019 with changes introduced under Donald Trump’s administration. Trump.

The new guidance removes some of the “inadequate barriers” to designating non-banking firms and replaces them with a process that allows firms under review to actively engage with regulators.

The FSOC’s proposed new risk assessment framework aims to improve the board’s ability to handle financial stability risks by examining a broad range of asset classes, institutions and activities, according to a Treasury fact sheet.

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Sacha Woodward

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