FSOC 2016 Annual Report
Financial
Stability Oversight Council
2016
Annual Report
Tuesday,
June 21, 2016
Key
Topics & Takeaways
·
Annual Report
Highlights: Treasury Staff Advisor Trent Reasons explained the
Financial Stability Oversight Council’s (FSOC’s) conclusion that there remain
vulnerabilities and emerging threats to the financial system, including from:
(i) cybersecurity; (ii) asset management products and activities; (iii)
capital, liquidity and resolution; (iv) central counterparties (CCPs); (v)
wholesale funding markets; and (vi) reference rates (benchmarks).
·
Legislative Proposals to
Enhance FSOC Transparency: Treasury Secretary Jack Lew underscored the
“critical” role that the FSOC plays in monitoring market developments and
addressing threats to financial stability. He claimed that the FSOC’s
approach has been “data driven” from its inception, recalled that the Council made
several efforts to improve its governance structure, and cautioned that certain
legislative proposals would “weaken” the FSOC’s ability to do its work, which
he said would undermine efforts to protect investors and consumers.
Speakers:
·
Jacob Lew, Treasury
Secretary
·
Martin Gruenberg,
Chairman, Federal Deposit Insurance Corporation
·
Timothy Massad, Chairman,
Commodity Futures Trading Commission
·
Trent Reasons, Director of Analysis, Financial Stability Oversight Council
Opening Remarks
Lew
opened the meeting by underscoring the “critical” role that the Financial
Stability Oversight Council (FSOC) plays in monitoring market developments and
addressing threats to financial stability. He claimed that the FSOC’s
approach has been “data driven” from its inception, and recalled that the
Council made several efforts to improve its governance structure and engage
broadly with external stakeholders on potential risks to the financial
system. Lew cautioned that certain legislative proposals would “weaken”
the FSOC’s ability to do its work, which he said would undermine efforts to
protect investors and consumers. Lew encouraged policymakers to remain
alert and responsive to new challenges that may threaten the soundness and
resilience of the financial system, and he foreshadowed that the FSOC’s sixth
annual report will highlight potential threats and emerging vulnerabilities
stemming from: (i) cybersecurity; (ii) market structure; and (iii) market
instability in the EU and other emerging markets.
Staff Presentation
Trent Reasons, Director of Analysis, Financial Stability Oversight Council
Reasons
summarized FSOC’s conclusion that the resiliency of the financial system and the
U.S. economy continue to improve, and that financial stability risks remain
“moderate.” He also summarized the array of regulatory reforms that have
been proposed or implemented over the course of the year, spanning Total Loss
Absorbing Capacity (TLAC) and the Securities and Exchange Commission’s
proposals to regulate asset management products and activities, among
others. Reasons explained the Council’s conclusion that, notwithstanding
these regulatory enhancements, there remain vulnerabilities and emerging
threats to the financial system, including: (i) cybersecurity; (ii) asset
management products and activities; (iii) capital, liquidity and resolution;
(iv) risks stemming from central counterparties (CCPs); (v) wholesale funding
markets; and (vi) reference rates (benchmarks).
Staff
Advisor
Another
staff advisor underscored the importance of addressing data gaps, for instance
in securities financing transactions, promoting widespread adoption of the
Legal Entity Identifier (LEI), updating mortgage data standards, expanding
regulators’ access to derivatives data, and improving the timeliness and
quality of pensions data. He also claimed that housing finance reform is needed
to promote a more sustainable system that enhances financial stability.
The staff advisor highlighted risks stemming from the low interest rate
environment and rising asset volatility, as well as changes in financial market
structure (such as the rise in automated trading). Finally, he reiterated
the risks that global economic and financial developments (including Brexit)
may continue to give rise to significant volatility in U.S. equity, bond and
currency markets.
Martin Gruenberg, Chairman, FDIC
Gruenberg
reiterated the importance of the FSOC to bring together financial regulatory
agencies to look across the financial system and identify risks on an annual
basis.
Timothy Massad, Chairman, Commodity Futures Trading
Commission
Massad
expressed his support for the annual report, particularly the report’s
recommendations on cybersecurity, market structure, and CCPs.
Additional
information about this event can be accessed here,
and the 2016 annual report can be accessed here.
,Blog Tags:,Blog Categories:,Blog TrackBack:,Blog Pingback:No,Hearing Summaries Issues:Capital/Resolution Authority/SIFIs,Hearing Summaries Agency:FSOC,Publish Year:2016
Financial
Stability Oversight Council
2016
Annual Report
Tuesday,
June 21, 2016
Key
Topics & Takeaways
·
Annual Report
Highlights: Treasury Staff Advisor Trent Reasons explained the
Financial Stability Oversight Council’s (FSOC’s) conclusion that there remain
vulnerabilities and emerging threats to the financial system, including from:
(i) cybersecurity; (ii) asset management products and activities; (iii)
capital, liquidity and resolution; (iv) central counterparties (CCPs); (v)
wholesale funding markets; and (vi) reference rates (benchmarks).
·
Legislative Proposals to
Enhance FSOC Transparency: Treasury Secretary Jack Lew underscored the
“critical” role that the FSOC plays in monitoring market developments and
addressing threats to financial stability. He claimed that the FSOC’s
approach has been “data driven” from its inception, recalled that the Council made
several efforts to improve its governance structure, and cautioned that certain
legislative proposals would “weaken” the FSOC’s ability to do its work, which
he said would undermine efforts to protect investors and consumers.
Speakers:
·
Jacob Lew, Treasury
Secretary
·
Martin Gruenberg,
Chairman, Federal Deposit Insurance Corporation
·
Timothy Massad, Chairman,
Commodity Futures Trading Commission
·
Trent Reasons, Director of Analysis, Financial Stability Oversight Council
Opening Remarks
Lew
opened the meeting by underscoring the “critical” role that the Financial
Stability Oversight Council (FSOC) plays in monitoring market developments and
addressing threats to financial stability. He claimed that the FSOC’s
approach has been “data driven” from its inception, and recalled that the
Council made several efforts to improve its governance structure and engage
broadly with external stakeholders on potential risks to the financial
system. Lew cautioned that certain legislative proposals would “weaken”
the FSOC’s ability to do its work, which he said would undermine efforts to
protect investors and consumers. Lew encouraged policymakers to remain
alert and responsive to new challenges that may threaten the soundness and
resilience of the financial system, and he foreshadowed that the FSOC’s sixth
annual report will highlight potential threats and emerging vulnerabilities
stemming from: (i) cybersecurity; (ii) market structure; and (iii) market
instability in the EU and other emerging markets.
Staff Presentation
Trent Reasons, Director of Analysis, Financial Stability Oversight Council
Reasons
summarized FSOC’s conclusion that the resiliency of the financial system and the
U.S. economy continue to improve, and that financial stability risks remain
“moderate.” He also summarized the array of regulatory reforms that have
been proposed or implemented over the course of the year, spanning Total Loss
Absorbing Capacity (TLAC) and the Securities and Exchange Commission’s
proposals to regulate asset management products and activities, among
others. Reasons explained the Council’s conclusion that, notwithstanding
these regulatory enhancements, there remain vulnerabilities and emerging
threats to the financial system, including: (i) cybersecurity; (ii) asset
management products and activities; (iii) capital, liquidity and resolution;
(iv) risks stemming from central counterparties (CCPs); (v) wholesale funding
markets; and (vi) reference rates (benchmarks).
Staff
Advisor
Another
staff advisor underscored the importance of addressing data gaps, for instance
in securities financing transactions, promoting widespread adoption of the
Legal Entity Identifier (LEI), updating mortgage data standards, expanding
regulators’ access to derivatives data, and improving the timeliness and
quality of pensions data. He also claimed that housing finance reform is needed
to promote a more sustainable system that enhances financial stability.
The staff advisor highlighted risks stemming from the low interest rate
environment and rising asset volatility, as well as changes in financial market
structure (such as the rise in automated trading). Finally, he reiterated
the risks that global economic and financial developments (including Brexit)
may continue to give rise to significant volatility in U.S. equity, bond and
currency markets.
Martin Gruenberg, Chairman, FDIC
Gruenberg
reiterated the importance of the FSOC to bring together financial regulatory
agencies to look across the financial system and identify risks on an annual
basis.
Timothy Massad, Chairman, Commodity Futures Trading
Commission
Massad
expressed his support for the annual report, particularly the report’s
recommendations on cybersecurity, market structure, and CCPs.
Additional
information about this event can be accessed here,
and the 2016 annual report can be accessed here.