The Financial Stability Oversight Council (FSOC or Council)1 was established by the Dodd-
Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act).2 One of the
purposes of the Council under the Dodd-Frank Act is to respond to emerging threats to the
stability of the U.S. financial system.3 The duties of the Council under the Dodd-Frank Act
include monitoring the financial services marketplace in order to identify potential threats
to U.S. financial stability; monitoring financial regulatory proposals and developments,
and making recommendations in such areas that will enhance the integrity, efficiency,
competitiveness, and stability of the U.S. financial markets; facilitating information sharing
and coordination among Council member agencies and other federal and state agencies;
recommending to the Council member agencies general supervisory priorities and principles
reflecting the outcome of discussions among the member agencies; and identifying gaps in
regulation that could pose risks to U.S. financial stability.4
The Council seeks to identify and address vulnerabilities in the U.S. financial system so
that abrupt and unpredictable shocks to economic or financial conditions do not impair
the ability of the financial system to provide needed services, including the clearing of
payments, the provision of liquidity, and the availability of credit. Vulnerabilities include,
for example, excessive leverage, excessive valuations, inadequate liquidity, contagion, or
concentration.5 Such vulnerabilities have the potential to amplify the effects of adverse shocks
as they propagate through the financial system and create systemic risks. Conversely, limiting
vulnerabilities makes the financial system more robust and better able to respond when
shocks arise.

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