In 2014, under the Obama administration, the Financial Stability Oversight Council kick-started an initiative aimed at better understanding the risks posed by the asset management sector. The willingness of the Trump administration to continue that work — particularly as it pertains to hedge funds — has been a looming question. The early signs, unfortunately, are not encouraging.
Before the Dodd-Frank Act created the FSOC, regulators only focused on their specific slice of the financial sector, with no systemic risk mandate. The lack of a systemic risk regulatory body to foster sustained communication and collaboration among disparate regulators was a key flaw in the financial regulatory structure prior to the financial crisis. Bringing together the different financial regulators around one table, the council gives them the authority to investigate risks to financial stability and the tools necessary to mitigate those financial stability threats across the financial system.
The above excerpt was originally published in American Banker.
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