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The Financial Stability Oversight Council (Council) today unanimously approved its 2014 annual report, which was developed collaboratively by the members of the Council and their agencies and staffs. Under the Dodd-Frank Act, the Council must report annually to Congress on a range of issues, including significant financial market and regulatory developments, potential emerging threats to the financial stability of the United States, and the activities of the Council. The report must also make recommendations to promote market discipline; maintain investor confidence; and enhance the integrity, efficiency, competitiveness, and stability of U.S. financial markets.
“One of the critical lessons from the financial crisis was recognizing the importance of detecting systemic risks and ways to mitigate them,” said Treasury Secretary Jacob J. Lew. “The Council’s annual report is an important part of that ongoing work.”
In its fourth annual report, the Council’s findings are organized around nine themes, highlighted in the executive summary, which recur throughout the report:
- The vulnerability to runs in wholesale funding markets, including tri-party repo and money market mutual funds, that can lead to destabilizing fire sales.
- Developments in financial products, new business practices, and the migration of certain financial activities outside of the regulatory perimeter.
- Potential risk-taking incentives of large, complex, interconnected financial institutions.
- The reliance on reference rates that may be susceptible to manipulation, such as the London Interbank Offered Rate (LIBOR) and foreign exchange rate benchmarks.
- The need for financial institutions and market participants to remain vigilant in relation to potential interest rate volatility.
- Cyberthreats and the increase of trading-related operational outages and incidents that could cause disruptions to markets and the financial system.
- Potential risks to U.S. financial stability and economic activity from financial developments abroad.
- The importance of closing financial data gaps and improving financial data quality.
- The need for significant reform in the housing finance system, including increased private capital, a reduction in the footprint of government-sponsored enterprises, and improvements in mortgage finance market infrastructure.
The Council also voted to adopt enhancements to its transparency policy and bylaws for its Deputies Committee. The Council has recognized the importance of transparency since its first meeting in October 2010, when it voluntarily adopted its transparency policy. The Council is committed to conducting its meetings in public whenever possible and to releasing minutes for all its meetings. The Council is continually examining how it can open more of its work to the public by balancing its responsibility to be transparent with its central mission to monitor emerging threats to the financial system.
The Council also approved the minutes from its March 27 meeting. The annual report, the amended transparency policy, the Deputies Committee bylaws, and the meeting minutes will be available at www.fsoc.gov.
In attendance at the Council meeting were:
- Jacob J. Lew, Treasury Secretary (Chairperson of the Council)
- Janet L. Yellen, Chair of the Board of Governors of the Federal Reserve System
- Thomas Curry, Comptroller of the Currency
- Richard Cordray, Director of the Consumer Financial Protection Bureau
- Mary Jo White, Chair of the Securities and Exchange Commission
- Martin J. Gruenberg, Chairman of the Federal Deposit Insurance Corporation
- Mark P. Wetjen, Acting Chairman of the Commodity Futures Trading Commission
- Melvin L. Watt, Director of the Federal Housing Finance Agency
- Debbie Matz, Chairman of the National Credit Union Administration
- S. Roy Woodall, Jr., Independent Member with Insurance Expertise
- Richard Berner, Director of the Office of Financial Research (non-voting member)
- Michael T. McRaith, Director of the Federal Insurance Office (non-voting member)
- John Huff, Director, Missouri Department of Insurance, Financial Institutions and Professional Registration (non-voting member)
- John Ducrest, Commissioner, Louisiana Office of Financial Institutions (non-voting member)
- David Massey, Deputy Securities Administrator, North Carolina Department of the Secretary of State, Securities Division (non-voting member)
For more information about each member agency’s financial reform implementation efforts, please follow the links below.
Board of Governors of the Federal Reserve System
Commodity Futures Trading Commission
Consumer Financial Protection Bureau
Federal Deposit Insurance Corporation
Federal Housing Finance Agency
National Credit Union Administration
Office of the Comptroller of the Currency
