The Financial Stability Oversight Council, the agency created to quickly identify and address risks to the stability of the U.S. financial system, needs greater transparency to do its job correctly, the Government Accountability Office says in a new study.
The FSOC also needs to create a better system of coordination, and to share more information with the public, the study asserts.
The GAO notes that coordination is important because the FSOC is composed of the heads of a number of disparate agencies.
The GAO report also voices concern with the work of the Office of Financial Research (OFR), which was created to be the “back office” of the FSOC, producing financial data and establishing metrics that members of the FSOC can use to measure financial risk within the system.
The GAO recommends that the FSOC and the OFR strengthen transparency and accountability by collecting and sharing financial-risk indicators, keeping detailed records of closed-door sessions and developing forward-looking plans to help “prioritize the threats.”
The report prompted two reactions. As part of the report, Mary Miller, Treasury undersecretary for domestic finance, said that Treasury supports the recommendations.
She also said that the FSOC has already “moved quickly to fulfill its statutory mission” and “promote greater collaboration among its members.”
Rep. Spencer Bachus, R-Ala., chairman of the House Financial Services Committee, asked that the FSOC and the OFR “operate transparently and efficiently, without imposing an undue burden on the nation's financial system.”
Bachus's letter was sent to Timothy Geithner, secretary of the Treasury Department. Under the Dodd-Frank Act provision which established the two agencies, the Treasury secretary heads the FSOC.
Bachus also demanded additional information.
The letter says that the OFR has not filled three of its top eight leadership positions, and asks what steps the Treasury Department is taking to fill those spots.
Bachus also says that the GAO report found that the FSOC has no strategic plan and uses its annual report as the only documentation for its strategic framework. Moreover, the report found that the FSOC's annual reports are “vague with regard to recommendations and fail to identify entities responsible for implementing—and the timeframes for completing—the recommendations.”
“Will the FSOC commit to making more detailed and specific recommendations in its annual reports that specify which member-agencies are responsible for the implementations of the recommendations and the timeframes for implementing them?” Bachus asks. “If not, please state with specificity the FSOC's reasons for not doing so.”
The report acknowledged that the FSOC and the OFR face “challenges” in doing their jobs, since risks to financial stability do not develop in precisely the same way in successive crises.
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