FSOC lacks approach to ID emerging fin. threats: GAO

September 19, 2014

WASHINGTON (9/22/14)--The Financial Stability Oversight Council (FSOC) "still lacks a comprehensive, systematic approach to identify emerging threats to financial stability," according to a Government Accountability Office (GAO) report released last week.

The report was done as a follow-up to recommendations given by the GAO to the council in September 2012.

The FSOC was created by the Dodd-Frank Act to identify and address threats to financial stability. The council consists of 10 voting and five nonvoting members. The 10 voting members include nine federal regulators and an independent insurance expert.

In September 2012, the GAO gave the council nine recommendations involving three areas: emerging threats and risks identification; transparency and accountability; and collaboration and coordination.

The recent report states that:

  • The Office of Financial Research (OFR) has made some progress in developing data tools to support FSOC since the 2012 report, but GAO's observations of two of these tools suggest that one tool does not focus on risks to the financial system, while another remains in a prototype phase;

  • FSOC has taken steps to improve its communication with the public but could do more to improve transparency and accountability, such as with a transparency policy approved in May. But FSOC staff said that they did not intend to keep detailed minutes of meetings because of the confidential information discussed;

  • FSOC staff also said that the impact of designating nonbanks for enhanced supervision would be assessed as part of a mandated January 2016 study. However, FSOC has not begun to prepare for this study; and

  • FSOC has taken steps to improve collaboration and coordination among member agencies but does not plan to act on some of GAO's recommendations on coordination. Staff said they did not plan to clarify the roles and responsibilities of the council, the OFR and member agencies because the overlapping responsibilities for monitoring systemic risk had not been problematic.

According to its report, the GAO "maintains that action is needed as its past work has shown that the lack of clear roles and coordination can lead to duplication, confusion and regulatory gaps."

Information for the GAO's study was obtained from June through September from staff and documents relating to the GAO's 2012 recommendations.

Use the resource link to access the complete report.

FSOC: Status of Efforts to Improve Transparency, Accountability and Collaboration (PDF)