The US Financial Stability Oversight Council (FSOC) [offical website] convened [press release] for the first time on Friday and approved a number of documents related to its duties under the Dodd-Frank Wall Street Reform and Consumer Protection Act [text, PDF]. The FSOC, which operates within the US Department of Treasury [official website] under the direction of US Secretary of the Treasury Timothy Geithner [official profile], is tasked with identifying threats to the financial stability of the US, promoting market discipline, and responding to emerging risks to the stability of the US financial system. At its inaugural meeting, the Council adopted bylaws and transparency policy [texts, PDF], and issued a request for information and study recommendations regarding the Council's study of the so-called Volcker Rule [FT backgrounder]. In August, Geithner told the media that the FSOC and other regulatory bodies will work over the coming months to forge [JURIST report] an "international agreement" among the world's financial institutions and regulators on a set of new capitalization rules to prevent a "race to the bottom" of risk standards among investors in the global market.
The Dodd-Frank Wall Street Reform and Consumer Protection Act was signed into law [JURIST report] by President Barack Obama in July and created the new regulatory council to monitor financial institutions in order to prevent companies from becoming "too big to fail." In addition to creating the FSOC, this legislation also gives the Federal Reserve [official website] new oversight over the largest financial institutions, creates a bureau of consumer protection, introduces multitudes of new regulations on derivatives and other financial instruments and limits the amount of capital banks can invest in hedge funds. In June 2009, the administration proposed a broad series of regulatory reforms [press release; JURIST report] aimed at restoring confidence in the US financial system in the wake of economic crisis [JURIST news archive].