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Thursday, May 28, 2009

Government Considers Single Banking Regulator

by Calculated Risk on 5/28/2009 12:22:00 AM

From the WaPo: U.S. Weighs Single Agency to Regulate Banking Industry

Senior administration officials are considering the creation of a single agency to regulate the banking industry ...

They favor vesting the Federal Reserve with new powers as a systemic risk regulator, with broad responsibility for detecting threats to the financial system. The powers would include oversight of previously unregulated markets, such as the derivatives trade, and of market participants such as hedge funds.

Officials also favor the creation of a new agency to enforce laws protecting consumers of financial products such as mortgages and credit cards.
Among these ideas is the creation of a single agency to regulate banks. The new regulator would assume responsibility for the safety and soundness of banks, currently divided among the Fed and three other agencies: the Office of the Comptroller of the Currency, the Office of Thrift Supervision and the Federal Deposit Insurance Corp. The OCC and the OTS would probably disappear, while the Fed and the FDIC would retain other responsibilities.
Officials also are considering giving the FDIC the power to seize large financial firms, such as the parent companies of banks, to prevent their collapse.
Another potential problem was that many banks and mortgage lenders were regulated by the states. See Conference of State Bank Regulators (CSBS) Update: Many state regulators did an excellent job (I was in contact with several in 2005) - however in making regulatory changes, we need to be aware of the role of the states.