In 2010, the Dodd-Frank Wall Street Reform and Consumer Protection Act created the Financial Stability Oversight Council, or FSOC, to identify and address threats to the stability of the U.S. financial system and the Office of Financial Research, or OFR, to support FSOC and Congress by providing financial research and data.
The Government Accountability Office, or GAO, has made 10 recommendations to strengthen the accountability and transparency of FSOC and OFR’s decisions and activities as well as to enhance collaboration among FSOC members and with external stakeholders.
The GAO recommendations for FSOC include:
- Keep detailed records (for example, detailed minutes or transcripts) of closed door sessions of principals meetings and to the extent possible make them publicly available after an amount of time has passed sufficient to avoid the release of market-sensitive information or information that would limit deliberations.
- Establish formal collaboration and coordination policies that clarify issues such as when collaboration or coordination should occur and what role FSOC should play in facilitating that coordination.
- More fully incorporate key practices for successful collaboration that GAO has previously identified. Internally, this could include working with agencies to rationalize schedules for rulemakings and conducting collaborative system-wide stress testing. Externally, this could include using professional and technical advisors including state regulators, industry experts, and academics.
- Establish a collaborative and comprehensive framework for assessing the impact of its decisions for designating financial market utilities, or FMUs, and nonbank financial companies on the wider economy and those entities. This framework should include assessing the effects of subjecting designated FMUs and nonbank financial companies to new regulatory standards, requirements, and restrictions; establishing a baseline from which to measure the effects; and documenting the approach.
- Develop more systematic forward-looking approaches for reporting on potential emerging threats to financial stability in annual reports. Such an approach should provide methodological insight into why certain threats to financial stability are included or excluded over time, emerging, and prioritize the latter.
- Make recommendations in the annual report more specific by identifying which FSOC member agency or agencies, as appropriate, are recommended to monitor or implement such actions within specified time frames.
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