Top Financial Regulators Set to Begin Examining Systemic Risk

Treasury Secretary Tim Geithner announced this morning that the newly-created Financial Stability Oversight Council (FSOC) will hold its inaugural meeting on October 1 at the U.S. Treasury Department.

A centerpiece of the Dodd-Frank Wall Street Reform and Consumer Protection Act (H.R. 4173), the FSOC consists of the nation’s top financial regulators and is charged with identifying and responding to systemic risks posed by large and interconnected bank holding companies and non-bank financial companies to the broader U.S. financial system. Proponents of the legislation believe that the FSOC’s broad oversight authority is necessary in order to eliminate the reoccurrence of “too-big-to fail” in the U.S. financial and political arenas.

Geithner, who will serve as the FSOC chairperson, will be joined in the meeting by seven voting members and three non-voting membership. Conspicuously absent from the list is Elizabeth Warren, who is serving in her new role as “Special Advisor” to the White House to help stand-up the Consumer Financial Protection Bureau (CFPB), and who presumably, cannot participate in the FSOC without the formal title of CFPB Director. Once a CFPB director is nominated and confirmed by the Senate, he or she will be voting member of the FSOC as pursuant to H.R. 4173. The law also states that the FSOC will meet at least on a quarterly basis.

Many in the financial industry are continuing to express significant concerns surrounding the powers of the FSOC’s research and analysis arm—the Office of Financial Research (OFR)—which is granted broad authority to collect information, including sensitive data, from regulatory agencies, bank holding companies, and non-bank financial companies to help the FSOC assess various risks to the U.S. financial system. The OFR will be led by a director appointed by the president and confirmed by the Senate, who will serve a six-year term. The OFR is bound to be a topic of discussion during next week’s FSOC meeting.

Below is a list of the FSOC’s voting and non-voting members that are expected to participate on October 1:

Voting Members
Ben Bernanke — Chairman of Federal Reserve
John Walsh — Acting Comptroller of the Currency
Mary Schapiro — Chairwoman of the U.S. Securities and Exchange Commission
Sheila Bair — Chairwoman of the Federal Deposit Insurance Corporation
Gary Gensler — Chairman of the Commodity Futures Trading Commission
Edward J. DeMarco — Acting Director of the Federal Housing Finance Agency
Debbie Matz — Chairman of the National Credit Union Administration

Non-Voting Members
John M. Huff — Director of the Missouri Department of Insurance, Financial Institutions, and Professional Registration
William S. Haraf — Commissioner of the California Department of Financial Institutions
David S. Massey — Deputy Securities Administrator of the North Carolina Department of the Secretary of State, Securities Division

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Madhu Aryal - September 30, 2010 2:51 PM

The industry is hoping that the first meeting of FSOC will discuss, set up plans and publish reports on various rules that Fed, SEC, CFTC, FDIC and OCC are responsibile to come out with and they will be published in one place so that we can educate ourselves with them. In so many ways, the Dodd-Frank Act 2010 speaks in conformity to Basel conventions, interpreted so far, therefore, we hope these regulators are working with Basel committee to bring these rules in line and clarity.

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