H.R.3682 - Financial Stability Oversight Council Improvement Act of 2025 (119th Congress)
Summary
H.R.3682, the Financial Stability Oversight Council Improvement Act of 2025, aims to amend the Financial Stability Act of 2010. The bill requires the Financial Stability Oversight Council (FSOC) to consider alternative approaches before designating a nonbank financial company for supervision by the Federal Reserve. This includes consulting with the company and its primary regulator to assess whether other actions or plans could mitigate potential threats to financial stability.
The bill seeks to ensure that FSOC explores less intrusive regulatory measures before imposing Federal Reserve supervision. This is intended to reduce the regulatory burden on nonbank financial companies.
The bill was introduced in the House of Representatives on June 3, 2025, and referred to the Committee on Financial Services.
Expected Effects
The primary effect of this bill, if enacted, would be to modify the process by which the FSOC designates nonbank financial companies for supervision by the Federal Reserve. It would likely lead to a more cautious and deliberative approach, potentially reducing the number of nonbank financial companies subject to Federal Reserve oversight.
This could result in reduced compliance costs for some companies. However, it might also increase the risk of financial instability if alternative measures prove insufficient.
Ultimately, the impact depends on how FSOC implements the new requirements and the effectiveness of alternative mitigation strategies.
Potential Benefits
- Reduced Regulatory Burden: Nonbank financial companies may face fewer compliance requirements, potentially freeing up capital for investment and innovation.
- More Tailored Regulation: The bill encourages a more customized approach to regulation, considering the specific circumstances of each company.
- Enhanced Consultation: The requirement for consultation with companies and their primary regulators could lead to more informed decision-making by FSOC.
- Promotes Innovation: By reducing regulatory burdens, the bill could foster innovation within the financial sector.
- Increased Transparency: The process of considering alternative approaches may lead to greater transparency in FSOC's decision-making.
Most Benefited Areas:
Potential Disadvantages
- Increased Financial Instability Risk: Delaying or avoiding Federal Reserve supervision could increase the risk of financial instability if alternative measures are inadequate.
- Potential for Regulatory Arbitrage: Companies may seek to avoid designation by FSOC, potentially leading to regulatory arbitrage.
- Complexity and Uncertainty: The new requirements could add complexity and uncertainty to the regulatory process.
- Increased Monitoring Costs: FSOC may need to expend more resources monitoring the effectiveness of alternative mitigation strategies.
- Delayed Response to Emerging Risks: The requirement for considering alternative approaches could delay FSOC's response to emerging financial risks.
Constitutional Alignment
The bill appears to align with the Constitution, particularly Article I, Section 8, which grants Congress the power to regulate commerce. By amending the Financial Stability Act, Congress is exercising its authority to oversee and modify financial regulations.
The bill does not appear to infringe upon any specific constitutional rights or liberties. The requirement for consultation with companies and regulators could be seen as promoting due process.
However, the potential impact on financial stability could indirectly affect the general welfare, as mentioned in the Preamble of the Constitution.
Impact Assessment: Things You Care About ⓘ
This action has been evaluated across 19 key areas that matter to you. Scores range from 1 (highly disadvantageous) to 5 (highly beneficial).