STATEMENT OF
MARTIN J. GRUENBERG
CHAIRMAN
FEDERAL DEPOSIT INSURANCE CORPORATION
on
OVERSIGHT OF THE FINANCIAL STABILITY OVERSIGHT COUNCIL
COMMITTEE ON FINANCIAL SERVICES
U.S. HOUSE OF REPRESENTATIVES
December 8, 2015
2128 Rayburn House Office Building
MARTIN J. GRUENBERG
CHAIRMAN
FEDERAL DEPOSIT INSURANCE CORPORATION
on
OVERSIGHT OF THE FINANCIAL STABILITY OVERSIGHT COUNCIL
COMMITTEE ON FINANCIAL SERVICES
U.S. HOUSE OF REPRESENTATIVES
December 8, 2015
2128 Rayburn House Office Building
Chairman Hensarling, Ranking Member Waters, and members of the Committee, thank
you for the opportunity to testify today on the work being undertaken by the Financial Stability
Oversight Council (FSOC). My testimony will discuss the FSOC’s efforts to identify and
address systemic risk, and the designation of entities as systemically important financial
institutions (SIFIs).
Background and Mission of the FSOC
The financial crisis that began in 2007 exposed a number of serious vulnerabilities in the
U.S. financial system. In the years leading up to the crisis, misaligned incentives, excessive
leverage and risk taking, and gaps in regulation all contributed to a serious and, at the time,
unrecognized increase in systemic risk. The crisis that followed resulted in the most severe
economic downturn since the Great Depression. While some risks affecting individual products
and institutions had been recognized, neither the financial markets nor the regulatory community
was able to see the whole picture.
The FSOC was established in 2010 by the Dodd-Frank Wall Street Reform and
Consumer Protection Act (Dodd-Frank Act) to address this gap in the regulatory framework. Its
key functions are to facilitate information sharing among its member agencies, to identify and
respond to emerging risks to financial stability, and to promote market discipline. The FSOC is
also responsible for designating nonbank SIFIs for heightened supervision by the Board of
Governors of the Federal Reserve System (FRB). By statute, the FSOC is composed of 10
voting members and 5 nonvoting members, and its structure allows the member agencies to work
you for the opportunity to testify today on the work being undertaken by the Financial Stability
Oversight Council (FSOC). My testimony will discuss the FSOC’s efforts to identify and
address systemic risk, and the designation of entities as systemically important financial
institutions (SIFIs).
Background and Mission of the FSOC
The financial crisis that began in 2007 exposed a number of serious vulnerabilities in the
U.S. financial system. In the years leading up to the crisis, misaligned incentives, excessive
leverage and risk taking, and gaps in regulation all contributed to a serious and, at the time,
unrecognized increase in systemic risk. The crisis that followed resulted in the most severe
economic downturn since the Great Depression. While some risks affecting individual products
and institutions had been recognized, neither the financial markets nor the regulatory community
was able to see the whole picture.
The FSOC was established in 2010 by the Dodd-Frank Wall Street Reform and
Consumer Protection Act (Dodd-Frank Act) to address this gap in the regulatory framework. Its
key functions are to facilitate information sharing among its member agencies, to identify and
respond to emerging risks to financial stability, and to promote market discipline. The FSOC is
also responsible for designating nonbank SIFIs for heightened supervision by the Board of
Governors of the Federal Reserve System (FRB). By statute, the FSOC is composed of 10
voting members and 5 nonvoting members, and its structure allows the member agencies to work