The Systemic Risk Council (SRC) provides an independent assessment of the most significant vulnerabilities shaping global financial stability. In this edition, the SRC underscores growing concerns around unresolved US stablecoin regulation, the rapid expansion of non-bank financial intermediaries, and recent shifts in large-bank capital requirements that may weaken essential safeguards. We note that with sentiment driven markets, we become desensitized to lingering geopolitical tensions and traditional economic fundamentals that signal caution. It is a perfect environment for market bubbles. This issue also features perspectives from leading US and EU regulatory officials on modernizing oversight frameworks, improving systemic-risk governance, and minimizing fragmentation. None of this comes easy in the face of increasingly interconnected financial, technological, and economic systems. Please enjoy the latest commentary on these and other systemic risk developments in this latest edition of the Quarterly Report.
Author Archives: Karen Pickering
CFA Institute Systemic Risk Council Welcomes Former FSB Chair Klaas Knot
The CFA Institute Systemic Risk Council (SRC) announced today that Klaas Knot, former Chair of the Financial Stability Board and President of De Nederlandsche Bank, has joined the Council. Knot brings decades of experience in global financial stability and systemic risk oversight, strengthening the Council’s international perspective.
Erkki Liikanen, Co-Chair of the Council, said: “We are thrilled to welcome Klaas Knot to our group. He is a distinguished and highly experienced voice on economic stability—the core focus of our Systemic Risk Council. His appointment broadens our European representation and adds further international perspective to our discussions.”
CFA Institute Systemic Risk Council Publishes Summer 2025 Quarterly Report
For more than a decade, the Systemic Risk Council (SRC) has provided an independent, noncommercial voice on global financial stability. By assessing vulnerabilities across markets and institutions, the Council offers nonpartisan guidance on how regulators can strengthen systemic oversight. Recent market shocks — from post-crisis stress events to new geopolitical and trade disruptions — have reinforced both the resilience of financial reforms and the limits of current safeguards, underscoring the need for vigilance, learning, and preparedness.
As we reach mid-2025, systemic risks remain elevated. Central bank independence, the rapid growth of non-bank financial intermediaries, and efforts to ease capital standards for global systemically important banks all pose challenges to stability. Meanwhile, geopolitical uncertainty, shifting trade policies, and the accelerating speed of financial markets magnify potential vulnerabilities. In this environment, robust monitoring, credible data, and sustained international cooperation are critical. The SRC will continue to evaluate these risks and provide timely recommendations, as reflected in this Summer 2025 report.
SRC Quarterly Systemic Risk Report Summer 2025
Systemic Risk Council Strongly Opposes Proposal to Weaken Capital Requirements for U.S. GSIBs
The CFA Institute Systemic Risk Council (Council) latest comment letter was submitted August 25 to U.S. bank regulators voicing strong concerns over proposed changes that would weaken key capital adequacy protections put in place during the Great Financial Crisis era (GFC), specifically, the enhanced Supplementary Leverage Ratio (eSLR), Total Loss-Absorbing Capacity (TLAC), and long-term debt capital requirements for the eight largest and most complex banks in the U.S., commonly referred to as Global Systemically Important Banks (GSIBs).
The Council’s co-Chairs noted that the proposals would dismantle key post-GFC safeguards that are in place to protect the U.S. economy from bank failures and systemic risk. In doing so, the bank regulators proposing these regulatory rollbacks have failed to show any compelling benefit to the real economy while exposing the financial system to increased instability and taxpayer risk.
Key Objections to the proposed deregulation of bank capital rules include:
- Increased Systemic Risk Without Clear Benefit: The proposal would significantly lower required capital buffers without adequate justification or cost-benefit analysis. The SRC warns this could lead to increased capital distributions to shareholders, further weakening the resilience of the banking sector.
- Undermining Post-Crisis Safeguards: The proposed changes would reduce the average eSLR buffer from 2% to approximately 0.85% for holding companies and from 6% to 3.84% for the “Insured Depository Institution” or “IDI” of such holding companies. Long-term debt and TLAC buffers would also be substantially reduced.
- Ignoring Historical Lessons: The Council emphasized the critical role that improved leverage limits played after the 2008 crisis and the recent Eurozone debt crisis, warning that risk-based capital rules alone are insufficient. The SLR is uniquely designed to capture off-balance-sheet risks and prevent regulatory arbitrage.
- Mischaracterizing the SLR’s Role: Contrary to the Agencies’ claim, the SRC notes that the SLR was never intended solely as a “backstop,” but as a complement and improvement to risk-based rules to ensure comprehensive protection.
- Treasury Market Rationale is Unconvincing: The Council rejects the notion that the current leverage framework has constrained U.S. Treasury market intermediation, pointing to increased UST holdings by both banks and primary dealers.
- Sovereign Subsidy Concerns: Reducing capital requirements to support demand for U.S. Treasuries risks distorting market rates and creates a hidden “sovereign subsidy” that could impair the integrity of reference rates used in mortgages and other financial instruments across the financial system.
Welcome to the Spring 2025 Report of CFA Institute Systemic Risk Council
Since 2013, our Council has offered an independent, noncommercial voice to assess significant financial and economic disruptions and to make recommendations for building a more robust process for systemic risk oversight in the US, Europe, and elsewhere. The SRC provides an unvarnished assessment of the readiness of global regulatory institutions to deal with evolving systemic vulnerabilities. Our Council advocates via comment letters to regulators and policy makers and offers regular media commentary on improvements in the detection, monitoring, and response to ever-emerging threats to economic stability.
The past two decades have seen an unprecedented number of major financial disruptions, which have stressed the resilience of our global financial systems. We began 2025 with lingering concerns about the potential for disruptions as the global economy began to unwind from unprecedented fiscal and monetary stimulus. Despite elevated recession risks, geopolitical hot-spots, and aggressive political shifts on trade policy, the broad economy remains relatively intact. Like most economic periods, spring 2025 continues the long tradition of trying to predict the extent and timing of economic disturbances that may arise from the puzzle of market, geopolitical, monetary, and fiscal policy conditions. The challenge of having a systemic risk early warning system and adequate mitigation tools at the ready is an enormous task. As we begin the year, changes in political and regulatory leadership around the globe further complicate analysis and planning.