Increased Regulation of Nonbank Financial Institutions on the Horizon

The federal government is attempting to increase its oversight of nonbank financial institutions. Nonbanks are companies that do not have a full banking license or are not supervised by a banking regulatory agency.

President Donald Trump made it more difficult for the government to regulate nonbanks, however Treasury Secretary Janet Yellen believes that the Trump administration’s rules increased the potential for hazardous risk within the financial system.

Under President Biden, a group of federal regulators are now suggesting that nonbanks be designated as systematically important. This designation would make it possible for the Federal Reserve to supervise them more intensely.  The Financial Stability Oversight Council approved the proposal, which will now be open to public comment for the next 60 days.

According to Treasury Secretary Yellen, nonbanks such as cryptocurrency companies, hedge funds, and money market funds have the potential to endanger the economic stability of the country if they are not properly monitored.  This was demonstrated by the March 2023 collapse of Silicon Valley and Signature Bank. Yellen explained to the Wall Street Journal, “The authority for emergency interventions is critical. But equally as important is a supervisory and regulatory regime that can help prevent financial disruptions from starting and spreading in the first place”.

Published by James Heinsman

James has worked as a hedge fund manager for years. As someone who has always enjoyed multi-tasking, James brings his vast financial experience and his hedge fund background to his position as writer and editor for Hedge Crunch. Editor James Heinsman can be contacted at james(at)