New council of regulators will take aim at systemic risks

By Brady Dennis

How’s this for a daunting assignment: Monitor the entire financial landscape for risks that could spark another crippling crisis. Identify and supervise firms that could pose those systemic risks. And make sure they never grow so large, complex and leveraged that their failure can wreak havoc across the globe. In a nutshell, that’s the mission of the new Financial Stability Oversight Council, which in coming weeks will hold its first gathering to figure out how to accomplish those lofty goals. Other provisions in the recently passed financial overhaul bill, including creation of a new watchdog to protect consumers, have garnered far bigger headlines. But for sheer power and reach, the council of regulators has few rivals. “It’s going to set the shape of U.S. financial regulation, especially for the very largest banks, for years to come,” said Karen Shaw Petrou, managing partner of Federal Financial Analytics, a Washington research firm. “It really will redefine any institution that’s fingered” as systemically important.

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