Delaney and Ross: GAO Report Makes Clear Need for FSOC Reform
WASHINGTON – The U.S. Government Accountability Office (GAO) has issued a report outlining how the Financial Stability Oversight Council (FSOC) can improve their process for designating nonbank institutions as a Systemically Important Financial Institution (SIFI). A SIFI designation triggers additional regulatory requirements.
In July, Rep. John K. Delaney (MD-6) and Rep. Dennis Ross (FL-15) introduced legislation to reform FSOC, The Financial Stability Oversight Council Improvement Act (H.R. 5180). The legislation reforms specific elements of the FSOC and the Office of Financial Research (OFR), improving their ability to accurately respond to threats to financial stability, while also maintaining the core function of comprehensively monitoring the stability of our nation’s financial system.
The GAO report outlines three areas where FSOC could “enhance the accountability and transparency of the designation process”: tracking and monitoring, disclosure and transparency, and scope of evaluation procedures. To read the GAO report, click here.
“Today’s GAO report highlights the need for greater transparency in FSOC’s process of designating nonbank institutions as SIFIs,” said Ross. “Backroom decisions made by FSOC are leading to increased costs for families across Florida and the United States who are simply trying to invest and plan for their future. I introduced H.R.5180, the Financial Stability Oversight Council Improvement Act of 2014 with Rep. Delaney to increase the transparency and accountability of this board of federal financial regulators. I am proud of this bipartisan effort, and look forward to working with Rep. Delaney to ensure hasty decisions being made by this group of financial regulators are not forcing additional burdens or costs on American families.”
“It is clear that we need more transparency from FSOC so that they can best carry out their important mission. The GAO’s nonpartisan report highlights a number of my concerns with the designation process and a need for more communication and hopefully puts more momentum behind reform. Getting the details right is important here because FSOC’s mission to mitigate systemic risk is paramount,” said Delaney. Along with my colleague Rep. Dennis Ross, I introduced The FSOC Improvement Act to address the same transparency and accountability concerns that the GAO underscored today and I look forward to working with the Financial Services Committee next year to address these very real concerns in a bipartisan manner.”
The Financial Stability Oversight Council Improvement Act reforms the SIFI designation procedure for FSOC.
Reforms in H.R. 5180 include:
- Requiring FSOC to notify a nonbank financial company that it has been identified for SIFI evaluation with an explanation of their concerns, prior to a SIFI designation
- Codifying FSOC procedures for SIFI designation and voting requirements
- Requiring FSOC to consider the impact of SIFI designation
- Mandating that FSOC explain the basis of its designation to the institution
- Allowing an institution to submit a plan to modify its business prior to designation
- Allowing an institution to contest their SIFI designation every five years