InfoBytes Blog
Yellen testifies on FSOC Annual Report, key areas of focus
On February 8, the U.S. Senate Committee on Banking, Housing, and Urban Affairs held a hearing titled “The Financial Stability Oversight Council Annual Report to Congress” with testimony provided by U.S. Treasury Secretary Janet Yellen. Secretary Yellen discussed progress, and continued focus, related to five topics addressed in FSOC’s 2023 Annual Report (covered by InfoBytes here): capital risks posed by nonbank financial institutions; climate-related financial stability risks; cybersecurity risks; monitoring artificial intelligence (AI) use in financial services; and digital asset oversight. In response to questioning from Senator Cortez Masto (D-NV), Yellen discussed how FSOC highlighted that about 70 percent of single-family mortgages were originated by nonbank mortgage originators during the first half of 2023. When Secretary Yellen was asked if the shift from banks to nonbanks in the mortgage space poses a financial stability risk “due to non-banks’ lack of access to deposits,” she responded that FSOC is “very focused” on the issue since non-banks are reliant on short-term financing. In addition, Yellen spoke about AI and learning its impact on vulnerabilities and risk, as well as the Basel III proposal, urging regulators to “finalize these rules as quickly as possible.”