WASHINGTON–Treasury Secretary Timothy Geithner today pledged to “preserve the right balance” between the work of the new Financial Stability Oversight Council and existing regulatory agencies.
Geithner made the pledge at the first meeting of the Financial Stability Oversight Council (FSOC), which was created by the Dodd-Frank law. Among members of the panel are John Huff, Missouri insurance commissioner. Huff, a non-voting member of the council, said creation of the FSOC indicates a “clear mandate” for state and federal regulators to work cooperatively in limiting systemic risk.
“As the sole insurance representative on this Council, I look forward to working with the other members” in helping this group do its job, he said.
Traditional insurance products do not normally constitute a systemic risk, but interconnections with other institutions and other products could potentially create problems, Huff said.
He said that insurers are subject to strong solvency and other rules that “have proven resilient in this crisis,” but called it “imperative” that insurance representatives offer their expertise to help the new group quickly identify new markets and new products that could produce or expand financial crises.
Echoing Geithner’s comments in opening the meeting, Francine L. Semaya, a New York insurance regulatory attorney, said the role of the new panel will be to monitor and provide early recognition of continuing and new systemic risks that could harm U.S. and world economic stability.
Semaya chairs the Federal Involvement in Insurance Regulation Modernization Task Force of the Tort Trial and Insurance Practice Section of the American Bar Association.
She called it “imperative” that the FSOC and ethe new Federal Insurance Office work with the National Association of Insurance Commissioners and state regulators in modernizing and strengthening the insurance regulatory system.
She said it was important for the FSOC “to fully understand the insurance industry and how it did not and does not pose a systemic risk to the economy, but how important a solvent insurance industry is to the overall economic health of the U.S.”
Other members of the FSOC include the heads of the Federal Reserve Board, the Federal Deposit Insurance Corporation, the National Credit Union Administration, the Office of the Comptroller of the Currency, the Securities and Exchange Commission, the Federal Housing Finance Agency and the Commodity Futures Trading Commission. Other members of the panel will be the director of Federal Insurance Office and an additional insurance expert.
The Dodd-Frank law says that the FSOC is to meet at least quarterly.