Establishing Certainty in Financial Regulations

Financial stability oversight must distinguish between systemic risk and investment risk. The bipartisan Financial Stability Oversight Council (FSOC) Improvement Act, introduced in the House, would revise the flawed risk assessment framework and designation guidance governing the systemically important financial institution (SIFI) designation process for nonbank financial institutions. Such designations should be used only when supported by rigorous, transparent analysis and after exploring less disruptive alternatives.

This legislation would limit the FSOC’s potential for overreach and instead put more authority in the hands of expert primary financial regulators like the SEC and the CFTC. 

Reform Would Benefit Investors and the Economy

Legislation is needed to strengthen the checks and balances that underpin sound regulation. This reform would benefit:

• Everyday investors: Establishing greater certainty for registered funds means continued access to cost-effective, well-regulated investment options.
• Fund managers and nonbank financial institutions, such as registered funds: Reducing the risk of unpredictable, costly designations that could hinder innovation and efficiency.
• The broader economy: Keeping capital flowing to productive uses while maintaining appropriate safeguards for financial stability.

ICI supports this bipartisan legislation to restore transparency and rigor to the SIFI designation process, ensuring that the FSOC remains focused on real risks to financial stability while protecting the millions of Americans who save and invest for their futures.