WASHINGTON — While other regulators busily check off implementation goals set by last year's financial reform law, the new body charged with limiting threats to the financial system is getting lost in the shuffle.

The Financial Stability Oversight Council, created by the new law to spot systemic risks, has hardly anything to show for since its inception. The council has made early steps related to initiatives in the Dodd-Frank Act to curb banks' proprietary trading and classify certain firms as "systemically important." But it has yet to seal the deal on anything, leading some to question if it is more relevant than informal policy groups that predate it.

"Is it doing less than, equal to, or more than the President's Working Group" on Financial Markets? said Ernest Patrikis, a lawyer at White & Case LLP. "At this point, it's hard to say that it's doing better. Maybe we shouldn't expect too much."

The council, which includes heads of other top regulators such as the Federal Reserve Board and Federal Deposit Insurance Corp. and is run by its own staff, was given broad responsibilities under Dodd-Frank to view the financial system through a single lens. It is charged with determining which nonbank financial companies are large and interconnected enough to receive heightened supervision, as well as overseeing the Office of Financial Research, which will analyze market data to identify potential systemic threats. Under the law, the council will also help implement the Volcker Rule, a Dodd-Frank provision named for former Fed Chairman Paul Volcker that limits banks' risky investments.

But beyond five meetings and preliminary moves on the Volcker Rule and designating nonbank firms, FSOC is well behind others. (The council announced Tuesday that its next meeting will be July 18.)

Observers said the oversight council was hurt by getting off the ground too slowly, and may simply be a lower priority for its members that run other agencies with their own workloads. Others said the 10-member panel is hearing conflicting messages from lawmakers to both work quickly but also be careful in its deliberations.

"They moved in a very deliberate fashion, which of course leaves them very vulnerable to the one year later what-have-they-done-challenge, because it's not that much," said Karen Shaw Petrou, a managing partner at Federal Financial Analytics Inc. "They're obviously under pressure. You've seen several hearings, calling them in to say two contradictory things: 'Why aren't you doing anything? And when are you going to do things in a much more complete, clear fashion? At this point, they are dammed on both counts, so they might as well do one or the other."

Douglas Landy, a partner in Allen & Overy LLP, said it was a miscalculation by the council to start slowly, which demonstrated an inability to take charge early in the process.

"FSOC took a really long time to gel," said Landy, formerly a lawyer for the Federal Reserve Bank of New York. "It was a huge error early on not to get FSOC up and running fast and start issuing things just to show they were in charge of what was going on."

Others said the council, run by members with varying roles and opinions about regulation, is likely still struggling to work together.

"They're still trying to figure out the mechanics of how to blend all of their various expertise into some kind of cohesive unit," said Kevin Jacques, the Boyton D. Murch Chair in Finance at Baldwin-Wallace College. "It's not only a matter of expertise, but getting these respective regulators to work and share in a way that they can go about doing the task at hand. That's going to be easier said than done."

Patrikis said the reform law gave members of the council enough to do at their own respective agencies that their work on the oversight board may be falling by the wayside.

"Each of the agencies on the council is really overwhelmed," he said. "They've got a huge portfolio of items to deal with it. As a practical matter, how much time do people really have for the council when you think of it that way? Maybe the answer is, 'Not a lot.'"

Perhaps even more cumbersome is the fact that until now, there has never been an interagency group quite like this.

"Nobody has ever tried FSOC before," said Landy. "They are working without a blueprint. It's the first time that anyone has legislated that regulators are supposed to look at the forest and not the trees."

For example, while the council now includes bank regulators, it is still waiting on members to provide needed expertise for the job of classifying nonbanks — such as insurers — as "systemically important financial institutions."

President Obama recently nominated S. Roy Woodall, a former Kentucky insurance commissioner who recently retired as senior insurance policy analyst at the Treasury Department, to fill a seat on the council meant for someone with insurance expertise. But other spots remain vacant as well. A director for the financial-research office and a head of the new Consumer Financial Protection Bureau have not been named to fill the two remaining seats.

Observers said the lack of regulators with specific nonbank expertise has stymied the process to designate which systemic firms need greater scrutiny. Meanwhile, the Fed and FDIC, two council members, are said to disagree on the amount of firms to designate, with the FDIC wanting more firms to quickly receive the "systemic" label — subjecting them to more oversight — and the central bank favoring a more cautious route.

"They really didn't give sufficient guidance on SIFIs," said Patrikis. "A year after, and we still don't know who's covered. There's concern out there by people in terms of scope. Is it going to be one, five, 10 or a 100?"

Cornelius Hurley, a professor at Boston University School of Law, agreed that greater clarity is needed.

"If you are on the margin of being a SIFI, the biggest question is, 'Am I in or am I out?'" Hurley said. "If I'm in, what is that going to mean to me? What are the capital levels that are going to be required of me? What are the liquidity levels that are going to be required of me?"

Yet even with the council's lack of progress, some said it is still too early to doubt its relevance.

"It's easy to criticize them because it hasn't gone the way perhaps people thought," said Landy. "They should really double down and make it work because it's by far the best proposal to marshal all of the federal agencies to fight system risk. We need something like that. It's not quite as dynamic yet as it should be."


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