The Financial Stability Oversight Council process for designating systemically important non-bank financial institutions, or SIFIs, could have more accountability and transparency, said a report issued Thursday by the Government Accountability Office.
The report, requested by Mike Crapo, R-Idaho, the ranking member of the Senate Committee on Banking, Housing and Urban Affairs, outlines three areas — information tracking, disclosure about the process and evaluation procedures — where the FSOC could accomplish more.
“FSOC has evaluated how companies might pose a threat to financial stability using only one of two statutory determinations standards (company’s financial distress, not its activities),” GAO wrote. By not using both standards when appropriate, FSOC might not be able to ensure that it designated all companies that could pose a threat to U.S. financial stability, the report said.
GAO also interviewed officials of companies evaluated by FSOC staff. “Generally, companies told GAO they were satisfied with FSOC’s communication with them during the evaluation process,” the report said.
When asked to comment on the draft report, Under Secretary of the Treasury Matthew Rutherford told the GAO that the FSOC “has received a number of suggestions proposed by stakeholders” regarding its SIFI designation process that complement the GAO recommendations, and that potential changes will be discussed further.
Two House sponsors of legislation to reform the SIFI designation process, Rep. John Delaney, D-Md., and Dennis Ross, R-Fla., said the GAO report highlights their concerns. “I look forward to working with the Financial Services Committee next year to address these very real concerns in a bipartisan manner,” Mr. Delaney said in a statement.
The GAO report is available on its website.