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    Federal Agency: "Financial Stability Oversight Council"

    4 publications with a total of 12 open recommendations including 1 priority recommendation
    Director: Lawrance Evans, Jr.
    Phone: (202) 512-8678

    2 open recommendations
    Recommendation: To help regulators address regulatory fragmentation and improve FSOC's ability to identify emerging systemic risks, as OFR develops and refines its financial stability monitoring tools, it should work with FSOC to determine ways in which to fully and regularly incorporate current and future monitors and assessments into Systemic Risk Committee deliberations, including, where relevant, those that present disaggregated or otherwise confidential supervisory information.

    Agency: Department of the Treasury: Financial Stability Oversight Council: Office of Financial Research
    Status: Open

    Comments: At the FSOC Systemic Risk Committee meeting held in December 2016, Treasury indicated that Office of Financial Research staff presented on the agency's Financial Stability Report. Officials indicated that they provided an assessment on potential financial stability risks, including macroeconomic, market, credit, funding and liquidity, and contagion risks. Systemic Risk Committee meeting attendees were able to compare and contrast these with the results from the Federal Reserve's systemic risk monitoring activities, which were also presented at the meeting. Office of Financial Research officials stated that there was general consensus at the meeting that these discussions were useful and that they should continue. GAO does not believe that this action is consistent with the intent of if February 2016 recommendation to fully and regularly incorporate current and future monitors and assessments into FSOC's Systemic Risk Committee deliberations. While GAO encourages sharing this type of information, the Office of Financial Research's Financial Stability Report is a publicly-available report. The intent of GAO's recommendation was to encourage the agency to fully incorporate all of its monitors into Systemic Risk Committee discussions, including its Financial Stability Monitor--its benchmark tool for assessing risks across the financial system. In addition, in its February 2016 report, GAO encouraged the agency to seek ways in which monitors that present disaggregated or otherwise confidential supervisory information can be incorporated in committee discussions. Without sharing such monitors and information, the Systemic Risk Committee may identify and advance the analysis of only a subset of systemic risks in a timely manner and may identify others too late or miss others altogether. The Financial CHOICE Act of 2016 was introduced in the 114th Congress. The act called for the Office of Financial Research to be eliminated. It was not passed before the end of the 114th Congress.
    Recommendation: To more efficiently and effectively monitor the financial system for systemic risks and reduce the risk of unnecessary duplication, OFR and the Federal Reserve should jointly articulate individual and common goals for their systemic risk monitoring activities, including a plan to monitor progress toward articulated goals, and formalize regular strategic and technical discussions around their activities and outputs to support those goals.

    Agency: Department of the Treasury: Financial Stability Oversight Council: Office of Financial Research
    Status: Open

    Comments: As of March 1, 2017, the Federal Reserve and the Office of Financial Research had coordinated to organize semi-annual meetings to jointly discuss views from their respective monitoring of the financial system for risks; but these meetings had not yet taken place. The first of these meetings is to be held in May 2017 following the agencies' respective systemic risk exercises. Initiating these discussions addresses part of GAO's February 2016 recommendation. GAO plans to review documentation from these meetings in 2017 to further assess if the agencies will use these meetings to jointly articulate individual and common goals, including developing a plan to monitor progress toward the goals. Fully addressing GAO's recommendation could help to ensure comprehensiveness in systemic risk surveillance and reduced risk of duplication. On September 9, 2016, the Financial CHOICE Act of 2016 was introduced. It called for the Office of Financial Research to be eliminated. The legislation did not pass before the 114th Congress ended.
    Director: Lawrance L. Evans, Jr.
    Phone: (202) 512-8678

    5 open recommendations
    Recommendation: To improve FSOC's control activities and help ensure that it better manages its determination process and achieves intended results, the Secretary of the Treasury, in his capacity as the Chairperson of FSOC and in consultation with FSOC members, should systematically record the staff contributing to determination evaluations, and monitor such information to help assess the progress and efficiency of determination evaluations..

    Agency: Department of the Treasury: Financial Stability Oversight Council
    Status: Open

    Comments: FSOC has created a document to track agencies participating in evaluations and has said that it will record and monitor information as new companies are evaluated. Although FSOC has created a template to record agency participation, FSOC still needs to collect and monitor such information including information on the agency staff participating in determination evaluations.
    Recommendation: To enhance disclosure and strengthen transparency, the Secretary of the Treasury, in consultation with FSOC members, for future determinations, to the maximum extent possible, should include additional details in its public basis documentation about why FSOC determined that the company met one or both of the statutory determination standards. Specifically, in addition to identifying that the size, significance, or other attributes of the company's characteristics could pose a threat to U.S. financial stability, FSOC should explain--without revealing sensitive information--how it concluded that the characteristics were sufficiently large or significant enough, or had other attributes, to meet one or both of the statutory determination standards.

    Agency: Department of the Treasury: Financial Stability Oversight Council
    Status: Open

    Comments: FSOC stated that it intends to include more detail in its public basis document while meeting its legal obligations to protect confidential information. In February 2015, FSOC issued supplemental procedures for nonbank financial company designations that stated its commitment to continuing to set forth sufficient information in its public bases to provide the public with an understanding of the Council's analysis while protecting sensitive, confidential information submitted by the company to the Council. FSOC's public basis document for its most recent designation, issued on December 18, 2014, included additional information compared to prior basis documents. However, the recent basis document did not fully explain how FSOC concluded that the company's characteristics were sufficiently large or significant enough, or had other attributes, to meet a determination standard.
    Recommendation: To help ensure that FSOC is comprehensively identifying and considering companies, the Secretary of the Treasury in consultation with FSOC members, should establish procedures to evaluate companies in Stage 2 and Stage 3 under both statutory determination standards when an evaluation in either stage concludes that a company does not meet one of the standards, or document--on a company-specific or more general basis--why the second determination standard is not relevant for determination evaluations.

    Agency: Department of the Treasury: Financial Stability Oversight Council
    Status: Open

    Comments: FSOC conducted a review of its nonbank designation procedures, including consideration of this recommendation, which resulted in issuance of supplemental procedures in February 2015. FSOC stated that it has not adopted formal changes to implement this recommendation but noted that the Council will continue to work to identify and evaluate potential changes to its practices and procedures and will revisit this recommendation in mid-2016.
    Recommendation: To help ensure that FSOC is comprehensively identifying and considering companies, the Secretary of the Treasury in consultation with FSOC members, should develop a process to collect information necessary for Stage 1 analysis, as appropriate, from certain nonbank financial companies for which public or regulatory information is otherwise unavailable. For example, FSOC could have companies for which such information is unavailable and that meet certain characteristics (such as quantitative thresholds similar to those used in Stage 1) report necessary information to the Office of Financial Research.

    Agency: Department of the Treasury: Financial Stability Oversight Council
    Status: Open

    Comments: FSOC staff are currently reviewing potential ways to supplement the existing public and regulatory information available to identify companies for evaluation in Stage 1. FSOC stated that it will revisit this recommendation in mid-2016.
    Recommendation: To improve FSOC's control activities and help ensure that it better manages its determination process and achieves intended results, the Secretary of the Treasury, in his capacity as the Chairperson of FSOC and in consultation with FSOC members, should systematically record the dates of key process steps.

    Agency: Department of the Treasury: Financial Stability Oversight Council
    Status: Open

    Comments: FSOC has created a document to centrally track key dates in each evaluation and has said that it will record and monitor the information as new companies are evaluated. However, FSOC has not yet recorded these dates in the document that it has created for this purpose.
    Director: Clowers, Angela N
    Phone: (202) 512-8678

    4 open recommendations
    including 1 priority recommendation
    Recommendation: FSOC and OFR should clarify responsibility for implementing requirements to monitor threats to financial stability across FSOC and OFR, including FSOC members and member agencies, to better ensure that the monitoring and analysis of the financial system are comprehensive and not unnecessarily duplicative.

    Agency: Department of the Treasury: Financial Stability Oversight Council
    Status: Open
    Priority recommendation

    Comments: As of October 2016, FSOC staff have said FSOC and its members, including OFR, understand their responsibilities, saying that meetings of FSOC's Systemic Risk Committee help to ensure that FSOC member agencies have clarity on their responsibilities and noted that the committee operated under a charter. However, our review of the charter found that it does not clarify responsibilities for monitoring threats to financial stability. They also stated that actions OFR and the Federal Reserve (both of which serve on the Systemic Risk Committee) agreed to take in response to a recommendation in a GAO report issued in February 2016 would help to clarify these responsibilities. However, these represent just two of FSOC's member agencies; similar collaborative steps by other agencies would support the clarity of roles for monitoring threats to financial stability. We maintain that more specific action from FSOC and OFR, including FSOC member and member agencies, is needed to address this recommendation that ensures clarity of roles and responsibilities in proactively and comprehensively monitoring for potential emerging threats in the financial system. Our past work has shown that the lack of clear roles and coordination can lead to duplication, confusion, and regulatory gaps.
    Recommendation: FSOC and OFR should clarify responsibility for implementing requirements to monitor threats to financial stability across FSOC and OFR, including FSOC members and member agencies, to better ensure that the monitoring and analysis of the financial system are comprehensive and not unnecessarily duplicative.

    Agency: Department of the Treasury: Financial Stability Oversight Council: Office of Financial Research
    Status: Open

    Comments: As of March 2017, OFR has taken some steps to work with the Board of Governors of the Federal Reserve System, a member agency of FSOC, to organize semi-annual meetings to jointly discuss views from their respective monitoring of the financial system for risks. We continue to monitor FSOC and OFR actions that would be responsive to clarifying responsibilities for monitoring threats to financial stability across all the agencies that are members of FSOC.
    Recommendation: To strengthen accountability and collaboration in FSOC's decision making, FSOC should establish a collaborative and comprehensive framework for assessing the impact of its decisions for designating 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.

    Agency: Department of the Treasury: Financial Stability Oversight Council
    Status: Open

    Comments: In response to an April 2017 presidential memorandum, Treasury is conducting a review of FSOC's designation process, including an assessment of the effects of designating FMUs and nonbank financial companies. This review will result in a report. We will update the status of this recommendation after we have reviewed the report.
    Recommendation: To strengthen accountability and collaboration in FSOC's decision making, FSOC should 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, separate current or past threats from those that are potentially emerging, and prioritize the latter.

    Agency: Department of the Treasury: Financial Stability Oversight Council
    Status: Open

    Comments: When FSOC publishes its annual report for 2017 and we have reviewed it, we will provide updated information.
    Director: Clowers, Angela N
    Phone: (202)512-3000

    1 open recommendations
    Recommendation: To enhance interagency coordination on regulations issued pursuant to the Dodd-Frank Act, the FSOC should work with the federal financial regulatory agencies to establish formal coordination policies that clarify issues such as when coordination should occur, the process that will be used to solicit and address comments, and what role FSOC should play in facilitating coordination.

    Agency: Department of the Treasury: Financial Stability Oversight Council
    Status: Open

    Comments: In May 2015, FSOC created the Regulations and Resolutions Committee to identify potential gaps in regulation that could pose risks to the U.S. financial stability. The committee's duties include serving as a forum for information sharing and coordination among the FSOC staff, member agencies and other federal and state agencies, as appropriate, regarding domestic financial services policy development, and consulting, as appropriate, on the development of regulations to implement the Dodd-Frank Act's orderly liquidation authority. While the committee's duties should help promote greater collaboration, they do not constitute a formal rulemaking coordination policy addressing, for example, when coordination should occur, processes for soliciting and addressing comments, and FSOC role in facilitating coordination among and between the financial regulators. In its 2010 comment letter, FSOC noted that it provides a forum for interagency collaboration and consultation, in part through its committees, and has not indicated any plans to develop a formal rulemaking coordination policy as we recommended, in part because of its need to preserve the independence of the regulators. Therefore, the recommendation remains open.