“Madam Secretary, I appreciate the opportunity to thank you as Chair of the Financial Stability Oversight Council (FSOC), the FSOC Secretariat for all of their work in preparation for today, and my colleagues on this year’s effort to complete the 2022 Annual Report.  I am happy to support the FSOC 2022 Annual Report. 

“As this year’s report states, and Madam Secretary, as you noted earlier, our economy and financial stability face a number of domestic and geo-political risks that are particularly important to the areas the Commodity Futures Trading Commission (CFTC) oversees.  In particular, I want to highlight and thank my colleagues for recognizing existing gaps in digital asset regulation.  Moreover, I appreciate the FSOC members’ recognition of several CFTC priorities regarding climate-related financial risk, the transition from LIBOR, and cybersecurity.  The CFTC, as always, stands ready to work with the FSOC to meet these challenges as we approach 2023. 

“With respect to the transition away from LIBOR, I support your comments, Madam Secretary, and those of Chair Powell and Chair Gensler, and most importantly the sentiments of Vice Chair Barr particularly with respect to the Term Secured Overnight Financing Rate (SOFR).  The Alternative Reference Rates Committee (ARRC) has recognized the use of Term SOFR Rates in certain instances such as the transition of business loans, but has recommended and emphasized that overnight SOFR in advance or in arrears be used for derivatives and non-loan cash products in order to promote financial stability.  Use of Term SOFR rates in derivatives and most other cash markets must be limited to avoid the types of problems created by LIBOR.  The increased use of Term SOFR for derivatives could lead to a decline in the overnight SOFR derivatives markets on which Term SOFR is based.  This outcome would be the antithesis of what the official sector and market participants have worked so hard to achieve over many years.  Therefore, it is important that the use of SOFR, Term SOFR, and any other reference rate continue to align with the recommendations of the ARRC, the Financial Stability Board, and FSOC. 

“Again, I’d like to thank my colleagues and you, Madam Secretary, for your leadership, and I look forward to next year’s work of the FSOC.”