FSOC Pledges to Disclose More Amid Criticism by Lawmakers

WASHINGTON — The Financial Stability Oversight Council on Wednesday expanded its transparency policies in an attempt to address criticism that it is a secretive group with minimal oversight.

In a two-page statement on the issue, the council defended its right to hold closed-door meetings that discuss supervisory and market-sensitive data, but said it would improve efforts to provide more information about meetings, including their agenda and any specific reasons it was not public.

"The council is continually examining how it can open more of its work to the public by balancing its priority to be transparent with its central mission of monitoring emerging threats to the financial system," Treasury Secretary Jack Lew said during a public meeting on Wednesday.

The new policy was released as part of the 10-member council's annual report, which identified several areas of concern that policymakers need to address in order to contain threats to the financial system.

In its 147-page report, the council outlined the top priorities that would guide its agenda for the coming year. Those included targeting reliance on short-term wholesale funding that are vulnerable to runs, making progress on housing finance reform, weighing alternative reference rates like Libor, and watching out for the impact of low interest rates. Many of those issues have been raised previously by the council, which was created in 2010 by the Dodd-Frank Act.

The decision to enhance its transparency comes amid recent criticism by lawmakers on Capitol Hill.

"Currently, FSOC is a complete black box," Rep. Scott Garrett, R-N.J., the chairman of the House capital markets subcommittee, said at an American Enterprise Institute event on Tuesday.

Garrett had sought to attend a closed-door meeting of the council on March 27, but was rebuffed.

"When independent financial regulators meet to formalize new rule proposals, those meetings are almost always open to the public and members of Congress," Garrett said. "I don't see why FSOC should be any different."

Garrett recently introduced a bill on the issue, which would force FSOC meetings to be open to greater participation from regulators and lawmakers. The council, headed by Lew, has also recently come under fire by two Securities and Exchange Commission commissioners for undercutting the agency's work.

The legislation would allow all board members at the relevant agencies, including the SEC, to participate in meetings. The bill would require votes to be taken first by the full agency board before a principal brings that vote to the FSOC. It would also open up meetings to lawmakers serving on related oversight committees and would subject the council to the Federal Advisory Committee Act and the Government in the Sunshine Act, two existing governance and transparency laws.

But in its policy statement, the FSOC said it makes sense to keep some meetings closed because regulators might discuss particular data about individual firms that is considered confidential.

"Protection of this information will be necessary in order to prevent destabilizing market speculation that could occur if that information were to be disclosed," according to the policy.

Roy Woodall, the council's independent insurance expert, endorsed its "incremental" step toward greater transparency, but also noted that Congress understood in creating the group that its work would be sensitive.

"The nature of the council's work is highly sensitive, which is recognized by Congress when it exempted it from the Sunshine Act and other governance laws," Woodall said at the meeting.

Still, the FSOC said it would provide at least seven days notice ahead of any scheduled meeting, which would include providing information about the agenda, specific reasons for a closed meeting, and the time and place of any open meeting.

The council also pledged to release information about the meeting "as soon as practicable" after each meeting on its website, as well as release minutes of the meeting.

Going beyond the current policy, the council said it would release its minutes "immediately following its next regularly scheduled meeting," but added a caveat that minutes could be subject to redactions.

It also reiterated the council's previously outlined reasons for deciding to keep a meeting closed, including if information being discussed is tied to an investigation or exempted from disclosure by executive order.

The council adopted a transparency policy voluntarily in 2010 and began considering revisions to it last year.

"The review considered a broad range of inputs, including the existing governance practices of six organizations with similar structures, memberships, or responsibilities to the Council," Mary Miller, the Treasury undersecretary for domestic finance, said at the public meeting.

Garrett, who hinted on Tuesday at potential changes to the council's policy, suggested the changes may not go far enough.

"It is better late than never," Garrett said. "However, I recently spoke to an informed person who shared with me that the additional provisions are merely window dressing and an attempt by the regulatory community to appear as if they are making substantive modifications. This is unfortunate, but not a surprise."