Financial Stability Improvement Act - Highlights Of HFSC Discussion Draft
Nov. 25, 2009
FEI Summary

On Oct. 27, 2009 the House Financial Services Committee (HFSC) announced the release of its version of the systemic risk bill, more formally, the Financial Stability Improvement Act (FSIA). Markup of the FSIA in the HFSC began on October 29, with over 70 amendments agreed to as of November 19.  Highlights of FSIA appear below.

Status of Financial Regulatory Reform
According to various press reports, HFSC Chair Rep. Barney Frank (D-MA) has stated he would like to see the full House to take up the entire Financial Regulatory Reform package in early December. In addition to the FSIA, other bills taken up by the HFSC as part of this initiative include the Investor Protection Act, the Over-the-Counter Derivatives Markets Act, the Consumer Financial Protection Agency Act, the Enhanced Transparency and Accountability in Credit Rating Agencies Act, the Private Fund Investment Advisers Registration Act, and the Federal Insurance Office Act.

Separately, on the Senate side, Senate Banking Committee (SBC) Chairman Sen. Chris Dodd (D-CT) released his committee's version of the financial regulatory reform package on November 19, in a Discussion Draft entitled the Restoring American Financial Stability Act (RAFSA). The SBC is engaged in markup of their version of the bill, as noted in this press release; they also issued a summary of the bill.  

The ultimate content of the financial regulatory reform package will depend on action in the full House and Senate as the two chambers work to agree on the final legislation, and the final law will then await the President's review and signature.

Highlights of Financial Stability Improvement Act (FSIA) Oct. 29 Discussion Draft
Following are highlights of the Financial Stability Improvement Act (FSIA), based on the content of the Committee Print of the Discussion Draft of the bill presented on October 29 (i.e., prior to amendments  agreed to during Committee markup).

Financial Services Oversight Council (FSOC)

The first section (subtitle) of the bill would create a Financial Services Oversight Council (FSOC). The members of the FSOC would include the Secretary of the Treasury, Chairman of the Federal Reserve Board, Comptroller of the Currency, Director of the Office of Thrift Supervision, Chairman of the Securities and Exchange Commission, Chairman of the Commodities Futures Trading Commission, Chairman of the Federal Deposit Insurance Corporation, Chairman of the Federal Housing Finance Agency, and Chairman of the National Credit Union Administration. 

The duties of the FSOC include:

1. To advise the Congress on financial regulation and make recommendations that will enhance the integrity, efficiency, orderliness, competitiveness, and stability of the United States financial markets.
2. To monitor the financial services marketplace to identify potential threats to the stability of the United States financial system.
3. To identify financial companies and financial activities that should be subject to heightened prudential standards in order to promote financial stability and mitigate systemic risk.
4. To issue formal recommendations that a Council member agency adopt heightened prudential standards for firms it regulates to mitigate systemic risk.
5. To facilitate information sharing and coordination among the members of the Council regarding financial services policy development, rulemakings, examinations, reporting requirements, and enforcement actions.
6. To provide a forum for discussion and analysis of emerging market developments and financial regulatory issues among its members.
7. At the request of an agency that is a Council member, to resolve a jurisdictional or regulatory dispute between that agency and another agency that is a Council member.

The FSOC is just one major section (subtitle) in the FSIA. Here is a listing of all the subtitles in the bill:

1. Financial Services Oversight Council
2. Prudential Regulation of Companies and Activities for Financial Stability Purpose
3. Improvements to Supervision and Regulation of Federal Depository Institutions
4. Further Improvements to the Regulation of Bank Holding Companies and Depository Institutions
5. Payment, Clearing, and Settlement Supervision
6. Improvements to the Asset-Backed Securitization Process
7. Enhanced Resolution Authority
8. Additional Improvements for Financial Crisis Management

Additional highlights of the FSIA can be found in the Summary of the Financial Stability Improvement Act included in the HFSC's Oct. 27 press release.

Further Information on Financial Regulatory Reform

FEI's Government Affairs office has posted additional summaries of the various House and Senate bills being taken up as part of financial regulatory reform. Visit FEI's website for more information, at www.financialexecutives.org. FEI members with questions about financial regulatory reform can contact Matt Miller, Senior Director, Government Affairs at mmiller@financialexecutives.org, or Cady North, Manager, Government Affairs, at cnorth@financialexecutives.org.

Prepared Nov. 25, 2009 by Edith Orenstein, director, Accounting Policy Analysis and Communications, Financial Executives International. This summary does not represent FEI opinion unless specifically noted above.