The panel created to prevent a repeat of the 2008 financial crisis said Tuesday that banks and other financial institutions are stronger now but regulators must remain alert to new risks including the danger posed from cyberattack.
In its annual report to Congress, the Financial Stability Oversight Council said recent cyberattacks have heightened concerns about the potential of even more destructive attacks that could significantly disrupt the workings of the financial system.
It said that greater attention must be paid to developing ways to combat computer hackers, and it urged greater collaboration among financial institutions and government agencies to share data that could help thwart a growing threat.
“Over the past year, financial sector organizations and other U.S. businesses experienced numerous cyber incidents, including large-scale data breaches that compromised financial information,” the panel said in its report.
The council was created by the 2010 Dodd-Frank Act, which Congress passed in the wake of the worst financial crisis in seven decades. It is chaired by Treasury Secretary Jacob Lew and includes representatives from other government financial-regulatory agencies, including the Federal Reserve, the Securities and Exchange Commission and the Federal Deposit Insurance Corp.
Lew was critical of legislation being pushed by Senate Banking Committee Chairman Richard Shelby, R-Alabama, which Lew said would put the country at greater risk of another crisis.
“Senator Shelby’s bill … contains changes to our financial regulatory framework that would roll back the clock and leave us with weakened oversight, fewer consumer protections and less effective tools to address risks in the system,” Lew said. “It would also needlessly tie this council in knots with delays and hurdles that would significantly impair our ability to identify and mitigate threats to financial stability, while leaving potential risk unchecked.”
Shelby’s bill would raise, from $50 billion to $500 billion, the asset threshold for banks that are subject to greater regulatory oversight due to the fear that their failure would present the greatest risks to the financial system. The measure also gives regulators greater oversight powers over the Federal Reserve.
Federal Reserve Chair Janet Yellen, who did not address the pending legislation in her remarks, said that the largest and most complex banking firms have made “great strides” in building up their capital cushions. But she said more work is needed to understand new threats posed by rapidly changing markets.
“While we have made considerable progress in recent years in reforming the financial system, our job is not done,” Yellen said. “We must continually look ahead to new risks to build and maintain the resilient financial system that can support economic growth.”