Statement by BPC's Aaron Klein on FSOC Accountability to the Senate Banking, Housing and Urban Affairs Committee

“The Bipartisan Policy Center’s (BPC) Financial Regulatory Reform Initiative was launched in 2012 to assess the Dodd-Frank Act: what is working, what is not working, and how financial regulation and supervision can be improved. Over the last three years, the performance of the Financial Stability Oversight Council (FSOC) has been a key area of our research and focus.

“As part of this effort, BPC recently analyzed and summarized 56 recommendations by stakeholders with a range of perspectives on ways to improve the FSOC. The proposals included ideas to enhance transparency and communications with the public, improve the “systemically important financial institution”, or SIFI, designation process, strengthen communications with market participants and further develop the “de-designation process” for nonbank firms already designated by FSOC as SIFIs. (A copy of this FSOC Reform Overview is attached as an addendum to this testimony.)

“In an effort to improve its processes, FSOC recently solicited reform ideas from outside stakeholders, including BPC. In January, the Council adopted a series of measures designed to improve transparency, strengthen communications, and enhance its designation and de-designation processes. These reforms are important steps in the right direction and FSOC should be applauded for taking them. Despite these initial, incremental steps, FSOC still has a long way to go in order to address legitimate concerns regarding its opaque processes, to improve its communication with companies under consideration for SIFI designation and those already designated, and to create a robust and implementable de-designation process. If it is to fulfill its core missions of improving regulatory coordination and mitigating risks to the financial system, FSOC must continue to evolve.”