	Introduction

The Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act; P.L. 111-203 ) created the Financial Stability Oversight Council (FSOC) and the Office of Financial Research (OFR), among other changes, in response to the financial crisis that followed the mortgage boom and bust of the 2000s. To pursue its mission, the FSOC is to foster communication among financial regulators, monitor systemic risks in the financial system as evaluated by the OFR, designate systemically important financial institutions (SIF Is) and financial market utilities (FMUs) for enhanced prudential regulation, provide annual reports on emerging risks and current responses, and alert Congress and the President to any unaddressed potential systemic risks. The FSOC and its OFR have a number of additional responsibilities, including making nonbinding recommendations to member agencies, encouraging research in financial stability, and promoting data standards for the financial industry. FSOC Structure

		Membership

The FSOC has 15 members: 10 voting members and 5 nonvoting members (see Table 1 ). In addition to the Treasury Secretary (chair of the FSOC) and the director of the OFR, nine council members are the heads of federal financial regulatory agencies, one is an insurance expert, and three are state-level financial regulatory representatives. The FSOC's voting members include the Treasury Secretary, the heads of the banking agencies (Federal Deposit Insurance Corporation [FDIC], Federal Reserve Board [FRB], Office of the Comptroller of the Currency [OCC], and National Credit Union Administration [NCUA]), securities agencies (Securities and Exchange Commission [SEC] and Commodity Futures Trading Commission [CFTC]), Consumer Financial Protection Bureau (CFPB), Federal Housing Finance Agency (FHFA), and an independent insurance expert appointed by the President. Nonvoting members include the directors of the OFR and the Federal Insurance Office (FIO), and one state regulatory representative for each of insurance, banking, and securities. Some FSOC actions require a supermajority council vote and an affirmative vote by the chair. FSOC must also identify regulatory gaps that might have systemic significance. Certain large bank holding companies (BHCs) are automatically considered SIFIs and subject to heightened prudential regulation independently of FSOC designation. The FSOC published the following simplified summary of how it determines if a SIFI threatens the financial stability of the United States:
The FSOC considers a "threat to the financial stability of the United States" to exist if a nonbank financial company's material financial distress or activities could be transmitted to, or otherwise affect, other firms or markets, thereby causing a broader impairment of financial intermediation or of financial market functioning. Identifying Regulatory Gaps and Overlaps that Could Cause Financial Instability

The FSOC is supposed to help coordinate member agencies within a complex regulatory architecture. The Financial CHOICE Act of 2017 ( H.R. It would rescind the FSOC's authority to designate firms as systemically important, eliminate the OFR, subject the FSOC to the congressional appropriations process, alter council membership, remove the ability to stay CFPB rules, and alter voting procedures and open meeting requirements, as well as implement broader regulatory changes. An alternative bill moving through the House, the Financial Stability Oversight Council Improvement Act of 2017 ( H.R. 4061 ), would require FSOC to consider additional factors during its designation process and make a number of other procedural changes to the designation process, including more opportunities for firms to participate in the process. A narrower proposal, the Financial Stability Oversight Council Insurance Member Continuity Act ( P.L. 115-61 ), became law on September 27, 2017, and modified the FSOC's independent insurance member's term to allow the current member to continue to serve in the event of a delay in the naming of a successor by the end of the member's six-year term. FSOC Membership for Agencies Led by Commissions and Boards

Currently, if an agency is led by a board or commission, instead of by a single director, the chair of the agency is a member of the FSOC. However, the OFR has salary and administrative requirements for professional researchers similar to those of other economic data collection and monitoring bureaus. FSOC recommendations to other agencies are nonbinding.
The Financial Stability Oversight Council (FSOC) and its Office of Financial Research (OFR) were established by the Dodd-Frank Wall Street Reform and Consumer Protection Act (P.L. 111-203) to address several potential sources of systemic risk. Some observers argue that communication and coordination of financial regulators was insufficient to prevent the financial crisis of 2008. To foster coordination and communication, the FSOC assembles the heads of federal financial regulators, representatives from state regulatory bodies, and an independent insurance expert in a single venue. The OFR supports the FSOC with data collection, research, and analysis.
The FSOC does not generally have direct regulatory authority; its role is to make policy recommendations to member agencies where authority already exists or to Congress where additional authority is needed. However, it is responsible for monitoring financial stability and designating nonbank financial companies and financial market utilities as systemic, which subjects those entities to heightened prudential regulation and the direct regulatory authority of other agencies. The FSOC considers a company to pose a threat to financial stability if a company's financial distress or activities could be transmitted to other firms or markets, causing broader disruptions to financial intermediation or other financial market functions. Three of the many relevant factors used for designation include leverage, interconnectedness with other systemically important nonbank financial institutions (SIFIs), and whether a primary prudential regulator already has responsibility for the SIFI and the activity.
Additional FSOC and OFR responsibilities include
collection and analysis of financial data, issuing nonbinding recommendations to member agencies, facilitating the resolution of jurisdictional issues among member agencies, issuing a congressionally mandated annual report, and reviewing Consumer Financial Protection Bureau (CFPB) rules under some circumstances.
The FSOC is composed of 15 members: 10 voting members and 5 nonvoting members. Voting members include the chair of the FSOC (Treasury Secretary), heads of the banking agencies (Federal Deposit Insurance Corporation, Federal Reserve Board, Office of the Comptroller of the Currency, and the National Credit Union Administration), Securities and Exchange Commission, Commodity Futures Trading Commission, Federal Housing Finance Agency, CFPB, and an independent insurance expert appointed by the President. Nonvoting members include the directors of the OFR and Federal Insurance Office, and state regulatory representatives, one each for insurance, banking, and securities. If an agency is led by a commission or board, the chair is a member, not other commissioners or board members. Additionally, some FSOC actions require a supermajority council vote and an affirmative vote by the chair.
The FSOC also monitors regulatory gaps and overlaps to identify emerging sources of systemic risk. Regulatory gaps and overlaps occur in part because agencies have different policy missions and authorities. The financial regulatory architecture includes agencies that issue and enforce behavioral mandates and bans, balance a set of risky but permissible activities, and administer an emergency program or participate in the financial system similarly to a private firm. These diverse missions continue to create regulatory gaps and overlaps.
In the current Congress, the House has passed the Financial CHOICE Act of 2017 (H.R. 10) to amend the FSOC. The bill would repeal the FSOC's ability to designate entities as systemic; eliminate the OFR; subject the FSOC to the congressional appropriations process; repeal the FSOC's ability to set aside CFPB regulations; and modify council membership, voting procedures, open meeting requirements, and other duties. The Financial Stability Oversight Council Improvement Act of 2017 (H.R. 4061), another bill that has received congressional action, would require FSOC to consider additional factors during its designation process and make a number of other procedural changes to the designation process, including more opportunities for firms to participate in the process. Additionally, the Financial Stability Oversight Council Insurance Member Continuity Act (P.L. 115-61) became law on September 27, 2017, and modified the term of the FSOC's independent insurance member.