GAO publishes framework for evaluating financial stability efforts

Principles for assessing the financial stability efforts of federal oversight bodies – by third parties and on their own behalf – were published in a report Thursday by the Government Accountability Office (GAO).

The framework, with six components containing 18 key principles and related standards, provides criteria for assessing the financial stability efforts of the Financial Stability Oversight Council (FSOC) and its member agencies, the GAO said. The office said it reflects consideration of the GAO’s prior work and other relevant literature, internal control and risk-management standards, and discussions with a wide array of stakeholders. The components of the framework include mandate and scope; governance; risk assessment; risk mitigation; evaluation; and data and information.

Financial Stability Oversight Council and its members. (Source: GAO-21-230SP)

“The framework principles reflect governance and operational standards and practices that, if met, promote sound decision-making around financial stability policy,” the report states. “As such, it is intended as a resource not only for GAO, but also for FSOC and its member agencies (in developing and implementing financial stability policy), the Inspectors General community (in overseeing FSOC and its member agencies’ activities), and Congress (in considering legislation related to financial stability). In addition, the framework may be used by legislators, regulators, and auditors in public-sector roles in other countries as well as by observers and analysts in the private sector.”

The GAO study included interviews of representatives of international organizations (Financial Stability Board and Bank of International Settlements) and academic and regulatory experts (including the FSOC lead agency, which is the Treasury Department, and its member agencies); and discussions with a wide range of external stakeholders.

Principles for Evaluating Policies to Assess and Mitigate Risks to Financial System Stability (GAO-21-230SP)

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