U.S. Treasury Secretary Scott Bessent is set to propose a major overhaul of the Financial Stability Oversight Council (FSOC) — the federal body responsible for spotting and addressing risks to the U.S. financial system. This initiative would represent a significant shift in how financial stability oversight is approached in the United States, potentially reshaping regulatory priorities and risk-monitoring tools.

The FSOC, chaired by the Treasury Secretary, brings together federal and state financial regulators with the goal of identifying systemic risks and improving coordination among agencies. Its mandate includes monitoring vulnerabilities in financial markets, large banks, nonbank institutions, and emerging sources of risk across the economy.

According to reports, Bessent’s proposal aims to modernize FSOC’s structure, streamline its processes, and enhance its ability to anticipate and respond to evolving threats. While the exact details of the changes are still emerging, the move could involve refining how systemic risks are assessed and how FSOC communicates and coordinates across multiple regulatory agencies.

Supporters of reform argue that the current framework — originally shaped after the 2008 financial crisis — needs updating to reflect today’s more complex financial environment, including innovations in financial technology, shadow banking, and nonbank finance. Critics of past oversight efforts have noted gaps in how nonbank entities and interconnected markets are regulated, and many see reform as overdue.

For markets and institutions, a revamped FSOC could mean earlier identification of systemic risks, more consistent regulatory responses, and clearer guidance on emerging threats — all aimed at strengthening financial stability ahead of future shocks.