At Financial Stability Council Meeting, Progress Claimed on Derivatives, Hedge Fund Regulation

At the second public meeting of the Financial Stability Oversight Council (FSOC) on Tuesday, the Council received an update from its staff on improving oversight of the swaps and derivatives markets and its review of the mortgage industry. Treasury Secretary Timothy Geithner, the chairman of the FSOC, and its members also unanimously approved a notice of proposed rulemaking regarding which firms should be designated as “systemically important financial market utilities,” or FMUs. Also attending were Federal Reserve Chairman Ben Bernanke and SEC Chairman Mary Schapiro.

Opening the public portion of the Council gathering following a closed session, Geithner reported that over the “past few months we’ve made very significant progress toward reforming financial services here and abroad,” noting that the international community has made particular progress “toward convergence” of regulation on derivatives and hedge funds. He went on to say that by the “middle of next year,” the Council is expected to adopt rules for “comprehensive oversight” of the derivatives market, which “played an important role in the crisis.”

By January, Geithner promised that the Council will propose a new rule “governing the designation of non-bank financial institutions,” allowing the FSOC to “place under heightened oversight all financial institutions, not just banks, that could pose a threat to our financial system." Other priorities of the Council, he said, would be to provide “greater clarity” on the orderly liquidations of major financial firms, and greater transparency to mortgage disclosure forms and credit card agreements