Financial Stability Oversight Council Improvement Act of 2025

The Financial Stability Oversight Council Improvement Act of 2025 would change how the government decides whether to place nonbank financial companies under Federal Reserve supervision. Currently, the Financial Stability Oversight Council can designate nonbank financial companies for Federal Reserve oversight if it determines they pose a threat to U.S. financial stability. This bill would require the Council to first determine that alternative actions would not adequately address the threat before imposing Federal Reserve supervision.

The practical effect of this bill would be to add an additional step to the oversight process. Before a nonbank financial company faces stricter regulations and Federal Reserve supervision, the Council would need to evaluate whether other measures—such as targeted regulations, enhanced monitoring, or other interventions—could effectively mitigate the financial risks the company poses. This could mean some companies avoid Federal Reserve supervision if alternative approaches are deemed sufficient.