Financial Stability Oversight Council

Financial Stability Oversight Council

3rd FSOC Meeting (January 18, 2011)
Agency overview
Formed July 21, 2011
Jurisdiction United States Government
Website Treasury.gov/FSOC

The Financial Stability Oversight Council (FSOC) is a United States federal government organization, established by Title I of the Dodd–Frank Wall Street Reform and Consumer Protection Act, which was signed into law by President Barack Obama on July 21, 2010.[1] The Dodd-Frank Act provides the Council with broad authorities to identify and monitor excessive risks to the U.S. financial system arising from the distress or failure of large, interconnected bank holding companies or non-bank financial companies, or from risks that could arise outside the financial system; to eliminate expectations that any American financial firm is "too big to fail"; and to respond to emerging threats to U.S. financial stability. The Act also designates the Secretary of the Treasury as Chairperson. Inherent to the FSOC's role as a consultative council is facilitation of communication among financial regulators. The FSOC has the authority to set aside certain financial regulations published by the Consumer Financial Protection Bureau if those rules would threaten financial stability.

Activities

On July 26, 2011, the First Annual Financial Stability Oversight Council Report [2] was issued by the Council fulfilling the Congressional mandate to report on the activities of the Council. The Report is intended to describe significant financial market and regulatory developments, analyze potential emerging threats, and make certain recommendations. The July 26, 2011 report warned that the United States faces potential losses connected with the European debt crisis.[3]

In September 2014, a group of Republican lawmakers accused U.S. regulators of "disparate treatment" of nonbank financial firms currently considered for tougher oversight. The lawmakers stated that the regulators should condust same level of analysis and due diligence for the insurance industry as it has for the asset management industry before formally considering whether to designate another insurance company.[4]

After much anticipation and debate about whether FSOC would and should designate individual asset managers (a nonbank financial firm) as systemically important financial institutions (SIFIs) which would subject them to greater oversight, FSOC announced in August, 2014, that rather than designating individual asset managers as SIFIs, it would focus on examining systemic risk posed by asset managers’ products, and activities. As a result of FSOC's announcement the Securities and Exchange Commission is now expected and assumed to take a prudential supervisory role of individual asset managers, in addition to exercising its traditional mandate of investor protection.[5]

Since the inception of FSOC, the Council has designated select financial market utilities (FMUs) as “systemically important.” The designation of systemically imporatant subjects the FMU to enhanced regulatory oversight. The three supervisory agencies charged with regulating systemically important FMUs are: the Federal Reserve Board, Securities and Exchange Commission, and Commodity Futures Trading Commission.[6]

Organization

Voting Members

The Financial Stability Oversight Council has ten voting members:[7]

  1. Secretary of the Treasury (chairs the Council)
  2. Chairman of the Federal Reserve
  3. Comptroller of the Currency
  4. Director of the Consumer Financial Protection Bureau
  5. Chairperson of the U.S. Securities and Exchange Commission
  6. Chairperson of the Federal Deposit Insurance Corporation
  7. Chairperson of the Commodity Futures Trading Commission
  8. Director of the Federal Housing Finance Agency
  9. the Chairman of the National Credit Union Administration Board
  10. an independent member (with insurance expertise), appointed by the President

Current Voters

Current Voters (sortable)
Agency Currently Party Appointed Removable Notes
Treasury Jack Lew Dem Directly Any time  
SEC Mary Jo White Dem Directly After 5-year term  
CFTC Timothy Massad Dem Directly After 5-year term  
Fed Janet Yellen Dem Directly After 4-year term  
OCC Thomas J. Curry Dem Directly After 5-year term  
CFPB Richard Cordray Dem Directly After 5 years Renominated
FDIC Martin Gruenberg Dem From 3 Board Members After 5-year term  
FHFA Mel Watt Dem Directly After 5-year term  
NCUA Debbie Matz Dem Directly After 6-year term  
Insurance S. Roy Woodall, Jr. Dem Directly After 6-year term  

Non-voting Members

There are five non-voting members:

  1. Director of the Office of Financial Research (part of the Treasury Department and established by the Dodd-Frank Act)
    1. Richard Berner
  2. Director of the Federal Insurance Office (part of the Treasury Department and established in this Act)
    1. Michael T. McRaith
  3. a state insurance commissioner, to be designated by a selection process determined by the state insurance commissioners (2-year term)
    1. Adam Hamm, Commissioner of the North Dakota Insurance Department, is the NAIC delegate to the FSOC.[8]
  4. a state banking supervisor, to be designated by a selection process determined by the state banking supervisors (2-year term)
    1. John P. Ducrest, Commissioner of the Louisiana Office of Financial Institutions
  5. a state securities commissioner (or officer performing like function) to be designated by a selection process determined by such state security commissioners (2-year term)
    1. David Massey, North Carolina Securities Division Director & Deputy Securities Administrator

Other names

There is a possibility of name confusion as recent news articles [9][10][11] have referred to this entity as the U.S. Financial Risk Council.

See also

References

  1. ↑ "Bill Summary & Status – 111th Congress (2009–2010) – H.R.4173 – All Information – THOMAS (Library of Congress)". Library of Congress. Retrieved July 22, 2010.
  2. ↑ "2011 Annual Report". U.S. Department of the Treasury. Retrieved August 8, 2011.
  3. ↑ The Center for Public Integrity. "U.S. Stock Market Plunge Followed Financial Stability Oversight Council Warning". The National Law Review. Retrieved August 8, 2011.
  4. ↑ Stephenson, Emily. "U.S. Republican lawmakers say regulators treat insurers unfairly". Reuters.
  5. ↑ "Asset managers: FSOC stands down, SEC stands up". http://www.pwc.com/us/en/financial-services/regulatory-services/publications/asset-managers-fsoc-stands-down-sec-stands-up-sifis.jhtml''. PwC Financial Services Regulatory Practice, December, 2014.
  6. ↑ "A closer look: Financial market utilities: Is the system safer?". http://www.pwc.com/us/en/financial-services/regulatory-services/publications/financial-market-utilities.jhtml''. PwC Financial Services Regulatory Practice, February, 2015.
  7. ↑ H.R. 4173, § 111
  8. ↑ http://www.naic.org/index_financial_reform_fsoc.htm
  9. ↑ http://www.cnbc.com/id/100875565
  10. ↑ http://www.reuters.com/article/2013/07/09/financial-regulation-fsoc-idUSN9N0AR00720130709
  11. ↑ http://www.reuters.com/article/2013/07/09/financial-regulation-fsoc-idUSL1N0FF1VW20130709

Further reading

External links