USA: financial regulation reform

The US Government's white paper Financial Regulatory Reform was published yesterday. It heralds significant reform including the creation of new agencies and expanded roles for the Federal Reserve and SEC. The proposals include (to quote from the white paper):

[1] Promoting robust supervision and regulation of financial firms.

• A new Financial Services Oversight Council of financial regulators to identify emerging systemic risks and improve interagency cooperation.
• New authority for the Federal Reserve to supervise all firms that could pose a threat to financial stability, even those that do not own banks.
• Stronger capital and other prudential standards for all financial firms, and even higher standards for large, interconnected firms.
• A new National Bank Supervisor to supervise all federally chartered banks.
• Elimination of the federal thrift charter and other loopholes that allowed some depository institutions to avoid bank holding company regulation by the Federal Reserve.
• The registration of advisers of hedge funds and other private pools of capital with the SEC.

[2] Establishing comprehensive supervision of financial markets.

• Enhanced regulation of securitization markets, including new requirements for market transparency, stronger regulation of credit rating agencies, and a requirement that issuers and originators retain a financial interest in securitized loans.
• Comprehensive regulation of all over-the-counter derivatives.
• New authority for the Federal Reserve to oversee payment, clearing, and settlement systems.

[3] Protecting consumers and investors from financial abuse.

• A new Consumer Financial Protection Agency to protect consumers across the financial sector from unfair, deceptive, and abusive practices.
• Stronger regulations to improve the transparency, fairness, and appropriateness of consumer and investor products and services.
• A level playing field and higher standards for providers of consumer financial products and services, whether or not they are part of a bank.

[4] Providing the government with the tools it needs to manage financial crises.

• A new regime to resolve nonbank financial institutions whose failure could have serious systemic effects.
• Revisions to the Federal Reserve’s emergency lending authority to improve accountability.

[5] Raising international regulatory standards and improve international cooperation.

• International reforms to support our efforts at home, including strengthening the capital framework; improving oversight of global financial markets; coordinating supervision of internationally active firms; and enhancing crisis management tools.

For further information see: white paper | executive summary | remarks by President Obama |

For commentary see: New York Times | Wall Street Journal | Washington Post | Financial Times |