S. 3578 — Financial Stability Oversight Council Improvement Act of 2025

This section revises the process under the Financial Stability Oversight Council (FSOC) for designating U.S. nonbank financial companies for supervision by the Board of Governors and prudential standards. Specifically, the FSOC may not vote on such a designation unless it first determines, after consulting the company and its primary financial regulatory agency, that alternative actions—including new or heightened standards and safeguards or a company-submitted plan—are impracticable or insufficient to mitigate the threat to U.S. financial stability. (As background, such designations subject nonbank companies to Federal Reserve oversight due to risks from leverage, interconnectedness, or other factors that could threaten financial stability.) The section also updates a cross-reference in subsection (f)(1) to include the new requirement.