The U.S. Government Accountability Office (“GAO”) issued a report (the “Report”) examining FSOC’s efforts to address the recommendations from a GAO 2012 report to improve transparency, accountability, collaboration and coordination. The Report found that, while FSOC has undertaken efforts to improve in those areas, additional efforts are needed.
The Report found that FSOC still lacks a comprehensive and systematic approach to identifying emerging threats to financial stability. Although FSOC developed two tools to address the GAO’s concerns, one of them does not focus on risks to the financial system and the other remains in the “prototype phase.”
Additionally, the GAO found that FSOC still needs to improve transparency and accountability. According to the Report, FSOC approved a revised transparency policy in which its staff said they had tried to provide more information in the minutes of meetings; however, FSOC staff said, they did not keep detailed minutes because of the confidential information discussed.
The Report also identified the ways in which FSOC could improve collaboration and coordination among other agencies. For example, FSOC approved bylaws for the Deputies Committee of senior officials from member agencies that describe its role in coordinating FSOC activities, which the GAO identified as a step toward improving collaboration. However, the FSOC staff stated, they do not plan to clarify the roles and responsibilities of FSOC, OFR and member agencies because the overlapping responsibilities for monitoring systemic risk had not been problematic.
Lofchie Comment: The amount of discretionary authority exercised by FSOC, in light of both the judgment-oriented powers granted to it and the opaque nature of its decision-making process, ensures that the FSOC’s way of designating systemically important financial institutions will continue to be controversial.
See: GAO Report: Status of Efforts to Improve Transparency, Accountability and Collaboration.
See also: 2012 GAO Report: New Council and Research Office Should Strengthen the Accountability and Transparency of Their Decisions.