The Financial Stability Oversight Council ("FSOC") reviewed a proposed capital regulation ("Enterprise Regulatory Capital Framework") by the Federal Housing Finance Agency ("FHFA") for Fannie Mae and Freddie Mac (the "Enterprises").

The FHFA proposal would strengthen the regulatory framework for the Enterprises by, among other things, imposing new "capital, liquidity, and stress testing requirements, supervision, and a credible resolution framework" to address the risk of default. The proposal, introduced on June 30, 2020, "is intended to enhance the quality and quantity of required capital so as to ensure that each Enterprise is capitalized to remain a viable going concern both during and after a severe economic downturn and also to mitigate the potential risk to national housing finance markets posed by the Enterprise."

FSOC encouraged the FHFA to:

(i) coordinate actions with other agencies "by generally taking consistent approaches to the capital requirements and other regulation of similar risks across market participants, consistent with the business models and missions of their regulated entities";

(ii) consider tailoring capital buffers to "mitigate the potential risks to financial stability and otherwise ensure that the Enterprises have sufficient capital to absorb losses during periods of severe stress and remain viable going concerns"; and

(iii) ensure "high-quality capital by implementing regulatory capital definitions that are similar to those in the U.S. banking framework."

Primary Sources

  1. FSOC Statement: Activities-Based Review of Secondary Mortgage Market Activities
  2. CFTC Statement, Heath P. Tarbert: FSOC's Activities-Based Review of Secondary Mortgage Market Activities
  3. FDIC Statement, Jelena McWilliams: FSOC Activities-Based Review of Secondary Mortgage Market Activities
  4. OCC Statement, Brian P. Brooks: FSOC's Consideration of Secondary Mortgage Market Activities

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