Financial regulation in the United States

Dodd-Frank Act

Federal Reserve

Financial regulation by state

Key terms

Commercial bank •Credit union •Depository institution •Financial system •Investment banking •Securities

Hover over the above terms for definitions.

TheFinancial Stability Oversight Council (FSOC) is an organization established under the Dodd-Frank Wall Street Reform and Consumer Protection Act to monitor and respond to risks to the United States' financial system. The nation's financial system is a complex network of banks and investment firms that facilitates exchanges between lenders and borrowers; it is the base for all economic activity in the nation. The FSOC was formed in on July 21, 2010, when PresidentBarack Obama (D) signed the Dodd-Frank Act into law.^[1]

The council was created to identify risks to U.S. financial stability both within and outside of the financial services marketplace and to respond to threats to the U.S. financial system. The FSOC also aims to “promote market discipline, by eliminating expectations […] that the government will shield [financial institutions] from losses in the event of failure."^[1]

The FSOC's operating budget comes from the Financial Research Fund, which also funds theOffice of Financial Research.^[2]

Organization

Administrative State
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The FSOC is made up of 15 members and is chaired by the Secretary of the Treasury. Ten of these members are voting members. Five non-voting members serve the council in an advisory capacity. Non-voting members are included in all of the proceedings, meetings, and deliberations of the FSOC, unless the chairperson of the FSOC deems it necessary to exclude them for confidentiality.^[3]

The ten voting members are selected as follows:^[3]

• Nine are on the council by virtue of their position in another organization.
  • Eight of these nine members are appointed to their primary positions by the president; the ninth is appointed to his or her primary position by the treasury secretary.
• One member is an independent member with insurance experience directly appointed by the president, with theadvice and consent of theUnited States Senate.

Voting members serve various terms depending on their positions. The chair of the council, the treasury secretary, may be removed at any time.^[3]

The five non-voting members serve two-year terms and are selected as follows:^[3]

• Two are on the council by virtue of their position in another agency.
• One is a state insurance commissioner designated by a selection process determined by the state insurance commissioners.
• One is a state banking supervisor designated by a selection process determined by the state banking supervisors
• One is a state securities commissioner designated by a selection process determined by state security commissioners.

The council may also appoint special advisory, technical, or professional committees within the FSOC.^[1]

According to the Treasury Department, the following agencies are member agencies of the FSOC:^[4]

• Board of Governors of the Federal Reserve System
• Commodity Futures Trading Commission
• Federal Deposit Insurance Corporation
• Federal Housing Finance Agency
• National Credit Union Administration
• Office of the Comptroller of the Currency
• Securities and Exchange Commission
• Treasury Department
• Consumer Financial Protection Bureau

Membership

The table below lists the members of the FSOC as of June 2025:

Authority and responsibilities

Daniel K. Tarullo, a member of the Board of Governors of the United States Federal Reserve Board, at an Office of Financial Research and Financial Stability Oversight Council conference.

The FSOC serves as the federal “systemic risk regulator," meaning that the agency is tasked with identifying and resolving issues with the nation's financial systems that threaten the entire financial system of the nation as a whole, such as widespread bank closures. The council has the authority to collect information from its member agencies, regulatory agencies (federal and state), and the Federal Insurance Office. In order to identify potential threats to financial stability, the council monitors the financial services marketplace as well as domestic and international financial regulations. The FSOC can also advise and make recommendations to Congress and member agencies for the purpose of enhancing the “integrity, efficiency, competitiveness, and stability of the U.S. financial markets.” The council must also make a regular report to Congress on that state of the U.S. financial system, and all voting members must affirm that the federal government is currently doing its part to maintain financial stability.^[1]

Under the powers granted by the Dodd-Frank Act, the FSOC can designate systemically important financial institutions. A systemically important financial institution is an institution whose failure the council believes will trigger a financial crisis. These institutions are sometimes referred to as being “too big to fail." The FSOC may recommend regulations designed to ensure that institutions do not fail or require assistance from the federal government in order to remain solvent. Recommendations can include requiring tighter oversight by an institution's regulatory body or requiring an institution to set aside some of its own capital to cover itself in the event of a failure. Financial regulatory bodies are obligated to implement the recommendations of the FSOC. The FSOC may also, with a two-thirds vote by the council, place non-bank financial companies or subsidiaries of international banks under the direct supervision of theFederal Reserve. The FSOC also has the ability to settle disputes among other federal agencies.^[1]

See also

• Office of Financial Research
• Federal Insurance Office
• Consumer Financial Protection Bureau

External links

• Financial Stability Oversight Council

Footnotes

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Dresch (2000) "Confronting the Administrative Threat" by Philip Hamburger and Tony Mills (2017) "Constitutionalism after the New Deal" by Cass R. Sunstein (1987) Federalist No. 23 by Alexander Hamilton (1787) "From Administrative State to Constitutional Government" by Joseph Postell (2012) "Interring the Nondelegation Doctrine" by Eric A. Posner and Adrian Vermeule (2002) "Rulemaking as Legislating" by Kathryn Watts (2015) "The Checks & Balances of the Regulatory State" by Paul R. Verkuil (2016) "The Myth of the Nondelegation Doctrine" by Keith E. Whittington and Jason Iuliano (2017) "The Progressive Origins of the Administrative State: Wilson, Goodnow, and Landis" by Ronald J. Pestritto (2007) "The Rise and Rise of the Administrative State" by Gary Lawson (1994) "The Study of Administration" by Woodrow Wilson (1887) "The Threat to Liberty" by Steven F. Hayward (2017) "Why the Modern Administrative State Is Inconsistent with the Rule of Law" by Richard A. Epstein (2008) Agencies Administrative Conference of the United States •United States Civil Service Commission •U.S. Government Accountability Office •U.S. Office of Information and Regulatory Affairs •U.S. Office of Management and Budget