Statements at the Financial Stability Oversight Council Meeting

Annual Report

Thank you, Madame Secretary. I support this report and thank the staff for their collaboration across the agencies. I’ve asked staff at the SEC to address a number of the points raised in the report and make recommendations to our Commission on a handful of resiliency projects.

You’ve seen one of those this week with money market funds. We learned a number of things with respect to both money market funds and open-end bond funds in 2020, which were highlighted in this report. We’re going to try to do everything we can at the SEC, based on economic analysis and input from the public, to strengthen the resiliency of these funds.

I also look forward to working with colleagues across the government on Treasury market resiliency. The agency also has projects related to stock market resiliency, such as potentially shortening settlement cycles.

Further, we’re working on across our various agencies on crypto assets, a $2-plus trillion asset class. It may not be the largest asset class, but unfortunately, right now it is largely operating outside of the banking and market regulator perimeters. While we each have jurisdictions and authorities, I think there could be instability that comes from the growing crypto markets.

Lastly, we’re working to develop climate risk disclosures that are consistent, comparable, and decision-useful.

Thank you.

LIBOR

On the London Interbank Offered Rate (LIBOR), I think the transition from this rate is really important. We’ll continue to use whatever tools we have at the SEC to help market participants with this transition.

In addition, I support changes to the Trust Indenture Act of 1939, an important act that we oversee at the SEC, to help facilitate the smooth transition from LIBOR. I think this transition has every chance to run smoothly if there’s a broad adoption of rates like Secured Overnight Financing Rate (SOFR). I do worry that some parts of the market want to rely on a replacement rate for LIBOR that’s dependent on a market that may collapse in times of stress. I spoke about this at our last meeting earlier meeting in June.[1] I think the so-called BSBY rate (Bloomberg Short-Term Bank Yield Index) has infirmities and will not stand the test of time — will not be good for financial stability — for future FSOC members. I do not think BSBY is compliant with the principles laid out in 2013 by the International Organization of Securities Commissions for a stable and reliable benchmark.[2] Thank you.