MFA supports FSOC proposal to restore activities-based approach to nonbank oversight

Proposal would improve regulatory predictability and reduce uncertainty for nonbank financial companies

Washington, D.C. - MFA urged the Financial Stability Oversight Council (FSOC) to finalize its proposed guidance on nonbank financial company designations in a comment letter submitted today. The proposal restores FSOC's emphasis on addressing risky activities at their source, rather than singling out individual firms. The council's 2023 framework, adopted under the prior Administration, wrongly prioritized firm designations.

MFA also urged Congress to pass the FSOC Improvement Act, currently pending in the Senate. The Act would provide a durable long-term framework for nonbank systemic risk oversight. Regulatory guidance can be reversed, while congressional action would provide lasting certainty for regulators, businesses, and investors.

"A stable and predictable regulatory framework is essential for strong capital markets and economic growth," said Bryan Corbett, MFA President and CEO. "FSOC's proposal restores a more common sense, transparent, and disciplined approach to assessing systemic risk. This will help reduce regulatory uncertainty for nonbank financial companies. Congress should build on these improvements by enacting the FSOC Improvement Act to ensure entity-specific designations truly remain a last resort."

An activities-based approach focuses on addressing financial activities that pose systemic risk, rather than singling out individual firms for heightened oversight. This framework is less likely to create competitive distortions than firm-specific designation. It is also more likely to identify genuine threats to financial stability and produce solutions to address systemic risk without designation.

MFA's letter supports four key improvements in the proposal:

• Restoring an activities-based approach as the default framework for addressing potential systemic risk.

• Reinstating a structured, sequenced designation process with greater transparency and coordination with primary regulators.

• Requiring cost-benefit analysis before any designation decision, including impacts on market liquidity, credit availability, and U.S. competitiveness.

• Requiring FSOC to assess the likelihood of financial distress rather than relying on unlikely worst-case scenarios.

Read the full letter here.

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