Yesterday, the Financial Stability Oversight Council (FSOC) held its first meeting, at which it adopted bylaws for the FSOC’s own governance, adopted a transparency policy, issued an advance notice of proposed rulemaking (ANPR) regarding supervisions and regulation of the “shadow banking system,” issued a notice and request for information regarding the FSOC’s required “Volcker rule” study and recommendations, and adopted an “Integrated Implementation Roadmap” outlining goals for implementation of the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act).
The FSOC’s bylaws define the FSOC’s internal governing protocols, and are intended to “provide for a collaborative structure” designed to support accountability as the FSOC works to fulfill its purpose.
In an effort to promote access to the financial reform process, the FSOC approved a transparency policy that emphasizes the engagement of stakeholders through an open meeting process while balancing concerns for the protection of sensitive supervisory information by providing for closed meetings where appropriate.
ANPR Regarding Authority to Require Supervision and Regulation of the Shadow Banking System
The Dodd-Frank Act contemplates that the FSOC will subject the “shadow banking” system, largely unregulated institutions conducting bank-like activities, to heightened supervision to “ensure that these institutions cannot escape tough oversight or threaten the stability of the broader financial sector.” The advance notice of proposed rulemaking (ANPR) concerning the shadow banking system is intended as “an initial step” toward the FSOC’s objective of developing measures for designating shadow banks for greater prudential oversight. The ANPR consists of fifteen questions designed to solicit public comment related to the implementation of these provisions and will be used to guide the development of specific regulatory proposals intended for publication by year end.
Notice and Request for Information Regarding the FSOC’s “Volcker Rule” Study and Recommendations
Section 619 of the Dodd-Frank Act requires the FSOC to conduct a study and make recommendations related to coordinated agency regulation pursuant to the so-called “Volcker Rule” , which restricts banking entities from engaging in proprietary trading and acquiring and retaining equity, partnership, or other ownership interests in or sponsorship of hedge fund or private equity funds. The Notice and Request for Information (RFI) is considered an “effective mechanism” for securing public and industry comment to support the FSOC’s study and recommendations. The RFI will have a 30-day public comment period.
Integrated Implementation Roadmap
The FSOC's "Integrated Implementation Roadmap" provides a timeline for the realizations of goals and the executions of tasks by the FSOC and its member agencies. The roadmap includes both statutory deadlines and non-statutory targets that may be revised as needed.