What Is the Financial Stability Oversight Council (FSOC)?
The Financial Stability Oversight Council (FSOC) was formed as a part of the passage of the Dodd-Frank Act to monitor risks to the US financial sector from the issues of large banks or financial holding companies that could derail the economy. The FSOC is an outgrowth of public outcry surrounding financial service bail-outs during the 2007 fiscal crisis, leading many to charge that accountability is essential among the banking and finance sectors and that no entity should be “too big to fail.” President Barack Obama signed the Dodd-Frank Act into law in July of 2010, and the FSOC issued its first report a year later.
Understanding the Financial Stability Oversight Council (FSOC)
The US Treasury Secretary occupies the Financial Stability Oversight Council’s chairman position. In addition to the chairman, the Financial Stability Oversight Council is composed of 10 voting and five non-voting members. The voting members include Treasury officials, Federal Reserve Board members and insurance experts.
The FSOC’s main tasks are to identify risks to the financial stability of the United States from financial organizations as well as stability risks outside of the financial sector. An example of this would include the main subject of the Council’s first report in 2011 on the threat to the US financial system from the European debt crisis. This was viewed as an emerging threat at the time but not one that could be addressed by pointing at any one institution. Additional tasks of the FSOC include increasing the discipline of financial markets in communicating the message that no institution is “too big to fail” and that the Government will not prevent losses to the financial sector and shield such organizations from losses.