FSOC Reform: An Overview of Recent Proposals

Nearly five years ago, the Dodd-Frank Act established the Financial Stability Oversight Council (FSOC) to provide a forum for that nation’s financial regulators to identify and respond to threats to financial stability and to promote regulatory cooperation. In recent years, however, the FSOC has faced a growing barrage of criticism, along with a flurry of ideas that have been held out as improvements. Policymakers on both the left and right have proposed strengthening the FSOC’s transparency and communication, reforming its process for designating large and complex financial institutions as systemically important, and even altering its membership and structure.

The FSOC has taken notice. Last October, Treasury Secretary Jack Lew, who also serves as the FSOC’s chairman, said that the FSOC was “committed to improving its effectiveness and engaging with the public…[and would] consider possible changes to its [designations] process.” FSOC staff followed up with a series of panel discussions and actively solicited reform ideas from a wide array of stakeholders, including BPC. FSOC staff are expected to report back to the full council soon with recommendations.

This analysis provides an overview of major FSOC reform ideas. This is not a BPC endorsement of any specific proposal beyond FRRI’s own recommendations, and is not intended to capture every FSOC reform idea ever proposed. Instead, BPC hopes that this document can serve as a useful tool for policymakers, lawmakers, and other analysts to consider, compare, and develop ideas to make FSOC work better.