2020 ANNUAL REPORT

1 FINANCIAL STABILITY OVERSIGHT COUNCIL1500 PENNSYLVANIA AVENUE, NW | WASHINGTON, 20220 FINANCIAL STABILITY OVERSIGHT COUNCILFINANCIAL STABILITY OVERSIGHT COUNCIL 2020 ANNUAL REPORT2020 ANNUAL REPORT iFinancial Stability Oversight CouncilThe Financial Stability Oversight Council (Council) was established by the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act) and is charged with three primary purposes:1. To identify risks to the financial stability of the United States that could arise from the material financial distress or failure, or ongoing activities, of large, interconnected bank holding companies or nonbank financial companies, or that could arise outside the financial services To promote market discipline by eliminating expectations on the part of shareholders, creditors.

2 And counterparties of such companies that the government will shield them from losses in the event of To respond to emerging threats to the stability of the financial to the Dodd-Frank Act, the Council consists of ten voting members and five nonvoting members and brings together the expertise of federal financial regulators, state regulators, and an insurance expert appointed by the President. The voting members are: the Secretary of the Treasury, who serves as the Chairperson of the Council; the Chair of the Board of Governors of the Federal Reserve System; the Comptroller of the Currency; the Director of the Consumer Financial Protection Bureau; the Chairman of the Securities and Exchange Commission; the Chairman of the Federal Deposit Insurance Corporation; the Chairman of the Commodity Futures Trading Commission; the Director of the Federal Housing Finance Agency.

3 The Chairman of the National Credit Union Administration; and an independent member having insurance expertise who is appointed by the President and confirmed by the Senate for a six-year nonvoting members, who serve in an advisory capacity, are: the Director of the Office of Financial Research; the Director of the Federal Insurance Office; a state insurance commissioner designated by the state insurance commissioners; a state banking supervisor designated by the state banking supervisors; and a state securities commissioner (or officer performing like functions) designated by the state securities state insurance commissioner, state banking supervisor, and state securities commissioner serve two-year terms.

4 Financial Stability Oversight Council2020 FSOC // ANNUAL ReportiiStatutory Requirements for the ANNUAL ReportSection 112(a)(2)(N) of the Dodd-Frank Act requires that the ANNUAL REPORT address the following:i. the activities of the Council;ii. significant financial market and regulatory developments, including insurance and accounting regulations and standards, along with an assessment of those developments on the stability of the financial system;iii. potential emerging threats to the financial stability of the United States; iv.

5 All determinations made under Section 113 or Title VIII, and the basis for such determinations;v. all recommendations made under Section 119 and the result of such recommendations; andvi. recommendations I. to enhance the integrity, efficiency, competitiveness, and stability of United States financial markets;II. to promote market discipline; andIII. to maintain investor of the ANNUAL ReportThis ANNUAL REPORT was unanimously approved by the voting members of the Council on December 3, 2020. Abbreviations for Council Member Agencies and Member Agency Offices Department of the Treasury (Treasury) Board of Governors of the Federal Reserve System (Federal Reserve) Office of the Comptroller of the Currency (OCC) Consumer Financial Protection Bureau (CFPB) Securities and Exchange Commission (SEC) Federal Deposit Insurance Corporation (FDIC) Commodity Futures Trading Commission (CFTC) Federal Housing Finance Agency (FHFA) National Credit Union Administration (NCUA)

6 Office of Financial Research (OFR) Federal Insurance Office (FIO)iiiContentsContents1 Member Statement ..12 Executive Summary ..33 Financial Developments .. Household Finance .. Nonfinancial Business Finance ..15 Box A: Nonfinancial Corporate Credit: Financial Market Fragilities and the COVID-19 Pandemic .. Government Finance ..24 Box B: Treasury Market Liquidity at the Onset of the COVID-19 Pandemic 27 Box C: Finances of State and Local Authorities and the COVID-19 Pandemic Financial Markets ..35 Box D: Recent Stress in Short-Term Wholesale Funding Markets.

7 43 Box E: Potential Risks in Commercial Real Estate .. Financial Institutions .. Financial Market Structure, Operational Challenges, and Financial Innovation .. Global Economic and Financial Developments ..1284 Council Activities and Regulatory Developments .. Select Policy Responses to Support the Economy .. Council Activities .. Safety and Soundness .. Financial Infrastructure, Markets, and Oversight .. Mortgages and Consumer Protection .. Data Scope, Quality, and Accessibility ..1632020 FSOC // ANNUAL Reportiv5 Potential Emerging Threats, Vulnerabilities and Council Recommendations.

8 Nonfinancial Business: Corporate Credit .. Financial Markets ..168 Box F: Council Statement on Activities-Based Review of Secondary Mortgage Market Activities .. Financial Institutions .. Financial Market Structure, Operational Challenges, and Financial Innovation .. Global Economic and Financial Developments ..184 Box G: Low-For-Long Interest Rates and Implications for Financial Stability ..1866 Abbreviations ..1897 Glossary ..1938 List of Charts ..2031 Steven T. Mnuchin Secretary of the Treasury Chairperson, Financial Stability Oversight Council Brian P.

9 Brooks Acting Comptroller of the Currency Office of the Comptroller of the Currency Jay Clayton Chairman Securities and Exchange Commission Heath P. Tarbert Chairman Commodity Futures Trading Commission Rodney E. Hood Chairman National Credit Union AdministrationJerome H. Powell Chairman Board of Governors of the Federal Reserve System Kathleen Kraninger Director Bureau of Consumer Financial Protection Jelena McWilliams Chairman Federal Deposit Insurance Corporation Mark A. Calabria Director Federal Housing Finance Agency Thomas E.

10 Workman Independent Member Having Insurance Expertise Financial Stability Oversight Council Member StatementThe Honorable Nancy Pelosi Speaker of the House United States House of RepresentativesThe Honorable Kevin McCarthy Republican LeaderUnited States House of Representatives The Honorable Michael R. Pence President of the Senate United States SenateThe Honorable Mitch McConnell Majority Leader United States Senate The Honorable Charles E. Schumer Democratic Leader United States SenateIn accordance with Section 112(b)(2) of the Dodd-Frank Wall Street Reform and Consumer Protection Act, for the reasons outlined in the ANNUAL REPORT , I believe that additional actions, as described below, should be taken to ensure financial stability and to mitigate systemic risk that would negatively affect the economy: the issues and recommendations set forth in the Council s ANNUAL REPORT should be fully addressed.