2021 ANNUAL REPORT

1 FINANCIAL STABILITY OVERSIGHT COUNCIL1500 PENNSYLVANIA AVENUE, NW | WASHINGTON, 20220 FINANCIAL STABILITY OVERSIGHT COUNCILFINANCIAL STABILITY OVERSIGHT COUNCIL 2021 ANNUAL REPORT2021 ANNUAL REPORT1 Financial 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 Chair 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; the Chairman of the National Credit Union Administration.

3 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 Stability Oversight Council2021 FSOC // ANNUAL Report2 Statutory Requirements for the ANNUAL ReportSection 112(a)(2)(N) of the Dodd-Frank Act requires that the Council s ANNUAL REPORT address the following:i.

4 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. 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.

5 To promote market discipline; andIII. to maintain investor confidence. Approval of the ANNUAL ReportThis ANNUAL REPORT was approved unanimously by the voting members of the Council on December 17, 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)

6 Federal Housing Finance Agency (FHFA) National Credit Union Administration (NCUA) Office of Financial Research (OFR) Federal Insurance Office (FIO)3 Table of ContentsTable of Contents1 Member Statement ..72 Executive Summary ..93 Financial Developments .. Household Finance .. Nonfinancial Business Finance .. Corporate Debt .. Small Business Debt .. Equities .. Government Finance .. Treasury Market ..31 Box A: IAWG Work on Treasury Market Municipal Bond Market .. Financial Markets .. Wholesale Funding Markets: Unsecured Borrowing .. Wholesale Funding Markets: Secured Borrowing.

7 Derivatives Markets .. Futures .. Exchange-Traded Options .. OTC Derivatives .. Derivatives Intermediaries and Platforms .. Commodities Market .. Residential real estate Markets .. Residential Housing Finance ..64 Box B: The Rapid Rise in House Prices .. Government-Sponsored Enterprises and the Secondary Mortgage Market .. Commercial real estate Market .. Financial Institutions .. Bank Holding Companies and Depository Institutions .. Bank Holding Companies and Dodd-Frank Act Stress Tests .. Insured Commercial Banks and Savings Institutions .. Branches and Agencies of Foreign Credit Unions.

8 Nonbank Financial Companies ..932021 FSOC // ANNUAL Securities REITs .. Money Market Funds .. Registered Investment Companies ..98 Box C: Nonbank Financial Intermediation & Council Initiatives .. Alternative Funds ..105 Box D: Failure of Archegos Capital Pension Funds .. Insurance Companies .. Specialty Finance .. Financial Market Structure, Alternative Reference Rates, and Financial Innovation .. Market Structure: Central Counterparty Clearing ..116 Box E: LIBOR Transition .. Financial Innovation .. Digital Assets .. Peer-to-Peer Payments.

9 Digital Lending .. Use of Technology in Financial Services .. Reliance of Financial Institutions on Third-Party Service Providers .. Global Economic and Financial Developments .. Foreign Exchange Market .. Advanced Economies .. Emerging Market and Developing Economies ..1324 Council Activities and Regulatory Developments .. Council Activities .. Risk Monitoring and Regulatory Coordination ..137 Box F: Climate-Related Financial Risk .. Determinations Regarding Nonbank Financial Companies and Activities-Based Approach .. Operations of the Council .. Safety and Soundness.

10 Enhanced Capital and Prudential Standards and Supervision .. Dodd-Frank Act Stress Tests and Stress Capital Buffer .. Resolution Planning and Orderly Insurance ..14 Financial Infrastructure, Markets, and Derivatives, Swap Data Repositories, Regulated Trading Platforms, and Central Counterparties ..1475 Table of Securities and Asset Management .. Accounting Standards .. Bank Secrecy Act/Anti-Money Laundering Regulatory Reform .. Mortgages and Consumer Protection .. Mortgages and Housing Finance .. Consumer Protection .. Data Scope, Quality, and Accessibility.