The risk of slowdowns or recession in Europe, Japan, and China are on the FSOC's list as well, even though there is little U.S. regulators can do about that. The fact that Libor and other lending rates may be inaccurate is also on the list. The reason being that manipulation may make people more-or-less worried about the banks and the economy than they should be. But what we are worried about here is banks. The fact that Libor was being manipulated seems to be one of Wall Street's worst-kept secrets, so is any banks were tricked by it.
Other things that show up on the list like money laundering seem like bad things, but not really things that would cause a major bank to fail, unless there was a massive fraud. Widespread fraud, however, is not on the list.
But the biggest problem with listing the things that will result in our financial doom is that inevitably we get it wrong. The things that result in our financial doom are the ones we didn't see coming -- black swans. And while the FSOC does detail what could go wrong, they spend much of their time saying why it won't. Perhaps the best thing we could do is hop a time machine back to early 2007 (the pre-financial-crisis era) and ask regulators to produce a list of things that could cause the banking sector to blow up. My guess is the list would be just as dismissive.
This week Sherrod Brown and David Vitter proposed a bill that significantly ups the amount of money banks have to have on hand to cover bad bets and soured loans. Currently, we are at 9%. The senators would like more like 15%. I can't say I am a huge fan of this. There are unintended costs, and there seems to be no limit to the thinking. (Why not make it 200%? That's really safe.)
The senators' point and ones who support the measure is a good one. We don't know where the risks are going to come from. The only answer is holding more capital than we think necessary. Lists, however, give the impression that regulators and banks know what's out there. The first step in making our banking sector safer is acknowledging that this is impossible.