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Financial Stability
Oversight Council

About FSOC

Frequently Asked Questions

Q: What is the Financial Stability Oversight Council (FSOC) and what does it do?

A: The Financial Stability Oversight Council has a clear statutory mandate that creates for the first time collective accountability for identifying risks and responding to emerging threats to financial stability. It is a collaborative body chaired by the Secretary of the Treasury that brings together the expertise of the federal financial regulators, an independent insurance expert appointed by the President, and state regulators.

The Council has important new authorities to constrain excessive risk in the financial system. For instance, the Council has the authority to designate a nonbank financial firm for tough new supervision to help minimize the risk of such a firm from threatening the stability of the financial system.

Additionally, to help with the identification of emerging risks to financial stability, the FSOC can provide direction to, and request data and analyses from, the newly created Office of Financial Research (OFR) housed within Treasury.

Q: How will the FSOC help maintain our nation’s financial stability?

A: Prior to the crisis, the U.S. financial regulatory framework focused narrowly on individual institutions and markets, which allowed supervisory gaps to grow and regulatory inconsistencies to emerge—in turn, allowing arbitrage and weakened standards. No single regulator had responsibility for monitoring and addressing overall risks to financial stability, which too often involve different types of financial firms operating across multiple markets leaving important parts of the system unregulated. The Dodd‐Frank Wall Street Reform and Consumer Protection Act addressed these problems through the creation of the FSOC, which is authorized to:

  • Facilitate Regulatory Coordination: The Council has a statutory duty to facilitate information sharing and coordination among the member agencies regarding domestic financial services policy development, rulemaking, examinations, reporting requirements, and enforcement actions. Through this role, the Council will help reduce gaps and weaknesses within the regulatory structure, to promote a safer and more stable system.
  • Facilitate Information Sharing and Collection: By statute, the Council has a duty to facilitate the sharing of data and information among the member agencies. In instances where available data proves insufficient, the Council has the authority to direct the OFR to collect information from certain individual financial companies in order to assess risks to the financial system. The collection and analysis of this data will aid the Council and OFR in their shared goal of removing blind spots within in the financial system and assisting regulators in identifying risks and other emerging threats.
  • Designate Nonbank Financial Companies for Consolidated Supervision: In the run up to the financial crisis of 2008, some of the firms which posed the greatest risk to the financial system were not subject to tough consolidated supervision.  The Dodd-Frank Act gives the Council the authority to require consolidated supervision of nonbank financial companies, regardless of their corporate form.
  • Designate Systemic Financial Market Utilities and Systemic Payment, Clearing, or Settlement Activities: The Dodd-Frank Act authorizes the Council to designate financial market utilities that perform payment, clearing, or settlement activities as systemic, requiring them to meet prescribed risk management standards and heightened oversight by the Federal Reserve, the Securities and Exchange Commission, or the Commodities Futures Trading Commission.
  • Recommend Stricter Standards: The Council has the authority to recommend stricter standards for the largest, most interconnected firms, including designated nonbank financial companies, as described above. Moreover, where the Council determines that certain practices or activities pose a threat to financial stability, the Council may make recommendations to the primary financial regulatory agencies for new or heightened regulatory standards.
  • Break Up Firms that Pose a “Grave Threat” to Financial Stability: The FSOC has a significant role in determining whether action should be taken to break up those firms that pose a “grave threat” to the financial stability of the United States.
Q: Who is the FSOC accountable to?

A: The Council provides new accountability to Congress and the American people by identifying emerging threats to financial stability and to coordinate regulatory actions to address them.  The Council is held accountable to Congress through the publication of an annual report and testimony provided by the Chairperson on the FSOC’s activities and emerging threats to financial stability. Moreover, the Council reports to Congress as appropriate on particular topics. For instance, the FSOC was required to conduct four studies in its first six months following enactment, including a report providing recommendations on implementation of the Volcker Rule. 

Q: Will FSOC Meetings be open to the public?

A: The Council is committed to conducting its business in an open and transparent manner. The Council opens its meetings to the public whenever possible. At the same time, the central mission of the Council is to monitor systemic and emerging threats, which requires the discussion of supervisory and other market‐sensitive data, including information about individual firms, transactions and markets that may only be obtained if maintained on a confidential basis.

Protection of this information is necessary in order to prevent destabilizing market speculation that could occur if that information were to be disclosed.  Accordingly, the Council has published a transparency policy that enumerates the reasons that the Chairperson may close a meeting, in whole or in part.

Q: How does FSOC operate?

A: The Council operates under a committee structure to promote shared responsibility among the member agencies and to leverage the expertise that already exists at each agency. The Council forms committees around its various statutory responsibilities and core issues that relate closely to risks where more than one agency has a significant interest.

The Council also maintains a small, independent staff to provide advice on statutory authorities and obligations, and to manage its document flow, records retention, and public records disclosure.  This staff also includes policy experts to help coordinate the work of the committees and, where appropriate, complex inter‐agency rule makings, to support Council functions such as designations, and to draft reports to Congress.

Q: Who serves on the FSOC?

A: The Council is made up of ten voting members and five nonvoting members.

The voting members are:

The nonvoting members, who serve in an advisory capacity, are:

The state insurance commissioner, state banking supervisor, and state securities commissioner serve two-year terms. 

Q: What is FSOC’s committee structure?

Deputies Committee

The Deputies Committee coordinates and oversees the work of the interagency staff committees. The members of the Deputies Committee include a senior official from each member agency. The Deputies Committee convenes approximately every two weeks to discuss the Council’s agenda and to direct the work of the Systemic Risk Committee and the five other functional committees. 

Systemic Risk Committee and Sub-committees

The systemic risk committee and two sub-committees provide structure for the Council’s analysis of emerging threats to financial stability. The structure is intended to balance the need for an interdisciplinary and cross-cutting approach with the need to leverage existing expertise and experience.

  • Systemic Risk Committee: This committee includes senior staff and reports to the Deputies Committee. This committee is the locus of accountability for risk monitoring and plays a role in prioritizing the review of sources of risk and guiding the work of staff and the systemic risk subcommittees.
  • Institutions Sub-committee: This sub-committee focuses on identifying and analyzing new, cross-cutting risk-related issues that affect financial institutions in the medium and longer term, and attempts to identify structural issues within financial institutions that could threaten financial stability, such as trends in leverage or funding structure, new products, or exposures to particular risks. This sub-committee is also a forum for agencies to discuss systemic issues of immediate relevance to financial institutions as well as share information about institution-related issues that arise in the course of their supervisory and oversight work that could impact financial stability.
  • Markets Sub-committee: This sub-committee focuses on identifying and analyzing new, cross-cutting risk related issues that affect financial markets in the medium and longer term, including structural issues within financial markets that could threaten financial stability, such as trends in volatility or liquidity, market structure, or asset valuations. This sub-committee is also a forum for agencies to discuss systemic issues of immediate importance as well as share information about market-related issues that arise in the course of their market oversight work that could impact financial stability.

Standing Functional Committees

To help carry out the regular and ongoing responsibilities and authorities of the Council, staff from the Member Agencies are also organized into several standing committees in addition to the Systemic Risk Committee. Each of the standing committees are responsible for considering any international implications of its work and support international coordination of the Council regarding its responsibilities.

  • Designations of Nonbank Financial Companies: This committee supports the Council by considering, making, and reviewing designations of nonbank financial companies to be supervised by the Board of Governors of the Federal Reserve System.
  • Designations of Financial Market Utilities and Payment, Clearing, and Settlement Activities: This committee supports the Council by considering, making, and reviewing designations of financial market utilities and payment, clearing, and settlement activities.
  • Heightened Prudential Standards: This committee supports the Council by making recommendations for heightened prudential standards with respect to designated nonbank financial companies and large, interconnected bank holding companies, and with respect to other financial activities and practices that could impact financial stability. This committee also supports the Council’s authorities for monitoring regulatory developments, facilitating information sharing, recommending supervisory priorities and principles, and identifying gaps in regulation that could pose risks.
  • Orderly Liquidation Authority, Resolution Plans: This committee supports any Council recommendations regarding resolution plan requirements, consideration of filed resolution plans, and consideration of FDIC/Federal Reserve proposed orders to require divestiture; and consultation with the Council on rulemakings to implement the Title II orderly liquidation authority.
  • Data: This committee supports the Council’s coordination of, and consultation on, agency rulemakings on data collection, and seeks to minimize duplication of data gathering operations. The committee supports a coordinated approach to information sharing and provides direction to, and requests data from, the Office of Financial Research (OFR). Additionally, the committee works with the OFR on data standardization efforts.
Q: Where can I find more information about FSOC member agencies?

 

 

 

 
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Last Updated: 10/14/2014 2:12 PM