5 Priorities for the Financial Stability Oversight Council

Economy, Policies

5 Priorities for the Financial Stability Oversight Council

The Financial Stability Oversight Council (FSOC) was created by the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 to identify and mitigate threats to the stability of the financial system, particularly those that develop outside the traditional banking sector.1 Although the United States is notable for having many financial regulatory agencies, before the 2008 financial crisis, no one regulator or regulatory body was responsible for looking out across the financial system and addressing systemic risks.

Financial regulators focused on their respective jurisdictions, while significant risks built up across jurisdictions and outside of any one regulator’s purview. Risky financial activities and products sprouted in the cracks of the financial regulatory infrastructure as regulatory arbitrage, intentionally exploiting its fragmentation. The FSOC was structured to mitigate some of these regulatory design flaws.

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