Views on improving the integrity of global capital markets
06 June 2012

CFA Institute Co-Sponsors Systemic Risk Council Led by Former Bank Regulator Sheila Bair

Four years after the near-collapse of the U.S. financial system, systemic risk is again on everyone’s mind, in large part due to the ongoing and deepening sovereign debt crisis unfolding in Europe. Unfortunately for investors, taxpayers, and consumers around the world, the regulatory mechanisms created to deal with these issues, including the new Financial Stability Oversight Council (FSOC), remain mired in political and operational oblivion.

It is into this void that CFA Institute and the Pew Charitable Trusts have joined forces with former Federal Deposit Insurance Corp. Chair Sheila Bair to launch the Systemic Risk Council (SRC). The SRC brings together experts in investments, financial markets regulation, policy making, and academia to offer seasoned opinions on the structuring of proper systemic risk oversight, comment on relevant FSOC and regulatory proposals, and consider which issues threaten economic recovery and ongoing strength of the U.S. markets. Paul Volcker, former Federal Reserve chair, will serve as senior adviser to the Council.

One of the SRC’s purposes is to increase the accountability of the FSOC. Created by the Dodd-Frank Wall Street Reform and Consumer Protection Act, the FSOC was intended to benefit from the collaboration of federal banking and markets regulators for the purpose of helping policy makers better understand and address systemic risk. Specifically, Title I of the Dodd-Frank Act gave the FSOC a mandate to identify potential threats to the financial stability of the United States, including institutions and activities that are “systemically significant.” Though created in 2010, the FSOC has been slow to act, accomplishing little in the way of realizing this mandate, despite the critical need for meaningful and timely action.

CFA Institute is pleased to back the SRC as part of our mission to lead the investment profession globally by promoting the highest standards of ethics, education, and professional excellence to the ultimate benefit of society. We wholeheartedly support the SRC’s goal of improving systemic risk oversight and to give investors greater confidence in global financial markets. Our advocacy efforts have focused on many of these issues in both the U.S. and Europe.

Given the wide-ranging and severe effect on American households caused by market disruptions, regulators and policymakers must strive to implement systems that not only identify but, if possible, prevent the types of risks that were the precursors to the 2008 financial crisis. By helping create the SRC, CFA Institute and the Pew Charitable Trusts have stepped forward to hold accountable the public entities charged with monitoring potential systemic risks, and to ensure they remain vigilant. We hope that in the long run this will have lasting positive benefits for investors and society at large.

Watch this space for future updates on the Systemic Risk Council.

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About the Author(s)
John Rogers, CFA

John Rogers, CFA, is the former president and CEO of CFA Institute.

9 thoughts on “CFA Institute Co-Sponsors Systemic Risk Council Led by Former Bank Regulator Sheila Bair”

  1. In order to save US investor and taxpayer, I suggest CFA to avoid unuseful Councils promoting the Dallas FED policy about “Too Big Too Fail” as indicated in its 2011 Annual Report [ ]

    Differently, CFA also will be responsible of Us national impoverishment.

    Kind regards
    Massimo Bugelli

  2. Dear Sirs,

    to better clarify, I suggest to CFA to promote the Dallas FED policy about “Too Big Too Fail” as indicated in its 2011 Annual Report [ ]

    Best regards
    Massimo Bugelli

  3. Dick Seale CFA says:

    Congratulations. A very bold step by some very respected operators. The SRC just might work.

    Dick Seale CFA

  4. Marc Vellrath says:

    A sad day for the CFA Institute. An organization formerly focused on education and professional ethics will now help to implement policies and practices that are sure to lead to the next financial crisis. Why not use this money instead to support independent research into how misguided regulation and government policies–supported by both Democrats and Republicans–increased demand for housing, drove up housing prices, and set the stage for the last financial crisis? The response to this last crisis has been a disaster–sharply increased concentration in banking; a huge increase in rulemaking focused on activities that had little or nothing to do with the crisis (hedge funds, short-selling, proprietary investing), etc. The actions promoted by this new council will not reduce systemic risk, they will increase systemic risk. The CFA Institute should return to its original purpose and should not promote the agenda of the financial/regulatory complex.

  5. Paul Hofman says:

    I hope this group can really effect change. However, I doubt that the great minds will be able to do accomplish anything without the help of real people that are involved in day to day investing. Don’t forget to get the opinion of the “little people” that really know what’s going on and how present policies are strangling equity investing.

  6. Scott Knapp says:

    Well done CFA Institute! This effort looks like an opportunity to add value to important discussions about risk surveillance and financial system oversight. And it provides a healthy lift to the CFA brand.

    One suggestion:

    Find ways to enable the membership to join this discussion. Some of us, including yours truly, fancy ourselves as policy wonks. I suspect some of the best ideas could come from the CFA Institute’s members.

  7. T Wells says:

    If the mission of CFA Institute is “to lead the investment profession globally by promoting the highest standards of ethics, education, and professional excellence to the ultimate benefit of society”, there is no direct relevance to SRC, leave alone the US-centric nature of this particular SRC.

    CFA Institute, please do your own job!

  8. John Rogers says:

    Thank you for your comments. Slow progress in managing systemic risk at both the national policy and the global levels is a significant concern for our members. In fact, when asked about the biggest risk facing global capital markets in the 2012 Global Market Sentiment Survey, more than a third of survey respondents said systemic disruptions. Over the past few years, CFA Institute has engaged with regulators in the U.S. and Europe as well as the G-20 over the need to address systemic risk posed by large, complex, interconnected institutions, practices, and products. We must continue to put pressure on policy makers to make necessary changes in our regulatory structure to prevent another catastrophic meltdown.

    1. Massimo Bugelli says:

      Systemic risk, posed by large, complex, interconnected institutions, practices, and products is not the real question.

      The real question is: “can the large, complex, interconnected institutions, practices, and products comply with prosperity ?”

      Dallas FED answers no, without doubt.

      So what is the utily to manage financial bombs that threaten to the propserity ?

      How Financial Stability Oversight Council (FSOC) can provide a comprehensive monitoring to ensure the stability of nation’s financial system, when we drives with mines underground?

      And what is the function of Systemic Risk Council ? To sign the road to avoid mines?

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