Will the elected President Donald Trump’s government again weaken the Financial Stability Oversight Council (FSOC)? This is a question many are concerned about. US Treasury Secretary Yellen warned on Friday (December 6) that ensuring a committee responsible for monitoring financial risks operates effectively will be 'crucial.'

The Financial Stability Oversight Council was established after the financial crisis of 2007-2009, with the aim of monitoring systemic risks.

During the FSOC meeting held on Friday, Yellen stated that during President Trump's first term, the staff of the council was reduced to single digits, and the infrastructure supporting inter-agency coordination was also significantly diminished.

Yellen commented on Trump's approach, stating, 'This means we are weaker in our ability to identify and respond to risks in the financial system.'

In contrast, she also added that the Democratic Biden administration has reinvested in the council, 'The strengthened council has already played a role in making our financial system more resilient, and our economy stronger. It is crucial that it continues to do so for the benefit of the American people.'

So far, Trump has not outlined a vision for financial regulatory agencies, but he has promised to cut cumbersome regulatory requirements.

The risks of commercial real estate and digital assets.

At the time Yellen made the above remarks, the FSOC once again warned in its annual report about the potential risks that commercial property, private credit, and cryptos pose to the usa financial system, calling on regulatory agencies and companies to remain vigilant and monitor vulnerabilities.

The committee stated that there are signs indicating that the risks in commercial property are increasing, especially in the office building sector in large cities. Rising office vacancy rates, slow rent growth, and increased borrowing costs are putting pressure on borrowers, leading to higher delinquency rates and increased provisions for banks.

Regarding cryptos, the committee warned that stablecoins could pose risks to financial stability and again called for legislation to establish a comprehensive regulatory framework for digital currency products. The committee stated that most other crypto companies and issuers either violate existing financial rules or operate outside their boundaries, thereby increasing the risk of "significant fraud and manipulation," calling for legislation to grant federal regulatory agencies clear authority to regulate the spot crypto market.

The FSOC also noted that while major financial institutions have not experienced significant cybersecurity incidents, cyberattacks have almost doubled since the COVID-19 pandemic, which is a major concern for regulators and the industry.

Editor/Rocky