FSOC Warns of Cybersecurity Threats, Pushes Deregulation in Annual Report
The Financial Stability Oversight Council (FSOC) issued its annual report on the activities of the group and significant market developments and threats for 2017 shortly before Washington closed down for the holiday season. FSOC was created to “identify risks and respond to emerging threats to financial stability.” The voting members of the Council are:
- The Secretary of the Treasury (also acts as the chair of the council)
- The Chairman of the Board of Governors of the Federal Reserve System
- The Comptroller of the Currency
- The Director of the CFPB
- The Chairman of the Securities and Exchange Commission
- The Chairman of the Federal Deposit Insurance Corporation
- The Chairman of the Commodity Futures Trading Commission
- The Director of the Federal Housing Finance Agency
- A Presidential Appointee with Insurance Expertise
One of the main responsibilities of FSOC is the coordination of regulatory efforts between member agencies, including information sharing and collection. As to data sharing, the annual report recommends that federal agencies and industry participants continue to work together to standardize data collection and improve data quality between government agencies. One member of the Council, Consumer Financial Protection Bureau (CFPB) interim Director Mick Mulvaney recently announced the Bureau would halt consumer complaint collection as the agency reviews its data security protocols.
Cybersecurity is identified as a chief concern at FSOC as financial institutions rapidly digitize operations, rely on blockchain technology, and move more functions online. The Office of the Comptroller of the Currency (OCC) is floating the possibility of granting special purpose bank charters to FinTech companies. Last week, a federal judge dismissed a suit against the OCC by the state of New York regarding the charter proposal as speculative.
Besides cybersecurity, deregulation is an important consideration for the current administration and members of the Council. President Trump recently published his “Unified Agenda of Regulatory and Deregulatory Actions.” The President’s regulatory plan includes almost 1,600 withdrawn or delayed actions. On Monday, the Federal Reserve proposed a repeal of Regulation C, related to the Home Mortgage Disclosure Act, as it is now superseded by CFPB rules.
The repeal of Regulation C by the Fed is part of a larger goal of FSOC and the Trump Administration to reduce regulatory burdens for financial institutions and limit compliance costs. The FSOC report comes at a time when bipartisan groups in Congress are also seeking to decrease compliance burdens on banks.
