Treasury Official Defends Risk Council Approach on Transparency

A U.S. Treasury Department official defended a council of financial regulators after a Government Accountability Office report said the panel should be more transparent.

The Financial Stability Oversight Council “must continue to find the appropriate balance between its responsibility to be transparent and its central mission to monitor emerging threats to the financial system,” Amias Gerety, deputy assistant secretary for the council, said in testimony obtained by Bloomberg News that was prepared for a U.S. House hearing tomorrow.

“Council members frequently discuss supervisory and other market-sensitive data during council meetings, including information about individual firms, transactions and markets that require confidentiality,” Gerety said in the testimony for the House Financial Services Committee’s oversight and investigations panel. Protection of non-public data “is often necessary to prevent destabilizing market speculation,” he said.

Gerety’s testimony responded to a GAO report from September saying public information on the council’s decision making is limited. The council, known as FSOC, was created by the Dodd-Frank law to help prevent another financial crisis. It is led by Treasury Secretary Jacob J. Lew and includes Federal Reserve Chairman Ben S. Bernanke.

‘Reasonable’ Transparency

The hearing will examine how the FSOC and the Office of Financial Research, which collects and analyzes data for the council, are working and whether the council “is providing reasonable transparency,” subcommittee Chairman Patrick McHenry, a North Carolina Republican, said in an interview yesterday.

The FSOC is responsible for coordinating financial regulators on oversight of financial markets “and we want to see if they’re doing their job,” McHenry said. He said the subcommittee will “dive deeply” into the question of whether some U.S. banks remain “too big to fail” and would need a bailout if faced with a crisis.

Nicole Clowers, a GAO official testifying at the hearing, said in prepared testimony that the FSOC and the research office “have taken steps to build mechanisms to identify potential threats to financial stability.”

“However, additional actions could strengthen the accountability and transparency of these efforts,” she said.

The council can designate non-bank financial companies as systemically important. Designated companies will be subject to Fed oversight, including tougher standards for capital and liquidity.

Before it's here, it's on the Bloomberg Terminal.