Financial Stability Oversight Council
3rd FSOC Meeting (January 18, 2011)
|Formed||July 21, 2011|
|Jurisdiction||United States Government|
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. 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.
On July 26, 2011, the First Annual Financial Stability Oversight Council Report  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.
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.
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.
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.
The Financial Stability Oversight Council has ten voting members:
- Secretary of the Treasury (chairs the Council)
- Chairman of the Federal Reserve
- Comptroller of the Currency
- Director of the Consumer Financial Protection Bureau
- Chairperson of the U.S. Securities and Exchange Commission
- Chairperson of the Federal Deposit Insurance Corporation
- Chairperson of the Commodity Futures Trading Commission
- Director of the Federal Housing Finance Agency
- the Chairman of the National Credit Union Administration Board
- an independent member (with insurance expertise), appointed by the President
|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|
There are five non-voting members:
- Director of the Office of Financial Research (part of the Treasury Department and established by the Dodd-Frank Act)
- Richard Berner
- Director of the Federal Insurance Office (part of the Treasury Department and established in this Act)
- Michael T. McRaith
- a state insurance commissioner, to be designated by a selection process determined by the state insurance commissioners (2-year term)
- a state banking supervisor, to be designated by a selection process determined by the state banking supervisors (2-year term)
- John P. Ducrest, Commissioner of the Louisiana Office of Financial Institutions
- 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)
- David Massey, North Carolina Securities Division Director & Deputy Securities Administrator
- Office of Financial Research
- Systemic risk
- Title 12 of the Code of Federal Regulations
- Dodd-Frank Wall Street Reform and Consumer Protection Act
- Federal Financial Institutions Examination Council
- Volcker Rule
- "Bill Summary & Status – 111th Congress (2009–2010) – H.R.4173 – All Information – THOMAS (Library of Congress)". Library of Congress. Retrieved July 22, 2010.
- "2011 Annual Report". U.S. Department of the Treasury. Retrieved August 8, 2011.
- The Center for Public Integrity. "U.S. Stock Market Plunge Followed Financial Stability Oversight Council Warning". The National Law Review. Retrieved August 8, 2011.
- Stephenson, Emily. "U.S. Republican lawmakers say regulators treat insurers unfairly". Reuters.
- "Asset managers: FSOC stands down, SEC stands up" (PDF). 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.
- "A closer look: Financial market utilities: Is the system safer?" (PDF). http://www.pwc.com/us/en/financial-services/regulatory-services/publications/financial-market-utilities.jhtml. PwC Financial Services Regulatory Practice, February, 2015.
- H.R. 4173, § 111
- Integrated Implementation Roadmap
- Transparency Policy
- Frequently Asked Questions
- Committee Structure
- Congressional Research Service Report on the Council
- Who is Too Big to Fail?: GAO’s Assessment of the Financial Stability Oversight Council and the Office of Financial Research: Hearing before the Subcommittee on Oversight and Investigations of the Committee on Financial Services, U.S. House of Representatives, One Hundred Thirteenth Congress, First Session, March 14, 2013
- Understanding Derivatives: Markets and Infrastructure Federal Reserve Bank of Chicago, Financial Markets Group
- Financial Stability Oversight Council
- Financial Stability Oversight Council in the Federal Register