Washington, D.C. – The Bipartisan Policy Center (BPC) today published a new report through its Regulatory Architecture Task Force with recommendations to make better sense of the fragmented U.S. financial regulatory system.
The report is authored by the task force’s co-chairs Richard H. Neiman, former New York State Superintendent of Banks and member of the congressional Troubled Asset Relief Program (TARP) oversight panel; and Mark Olson, former Governor of the Federal Reserve Board and former chairman of the Public Company Accounting Oversight Board.
The Dodd-Frank Act responded to several issues highlighted by the most recent financial crisis, but left certain structural weaknesses within the U.S. regulatory architecture unaddressed. In light of this reality, BPC convened the Regulatory Architecture Task Force – one of five task forces within BPC’s Financial Regulatory Reform Initiative.
Specifically, Dodd-Frank missed an important opportunity to rationalize the U.S. regulatory architecture to reduce organizational overlap, protect taxpayers, and further strengthen the safety and soundness of the financial system. BPC’s task force made a number of major recommendations, including:
- Creating a single banking regulator and examination process to improve the quality of supervision,
- Focusing the Federal Reserve on regulation of systemic risk and altering the bank SIFI threshold and determination process to $250 billion to improve financial stability,
- Empowering the Financial Stability Oversight Council to prevent systemic threats and better coordinate regulation,
- Establishing the Office of Financial Research as a fully independent agency outside the Treasury Department to better identify risks to the financial system,
- Creating a single capital markets regulator to improve coordination,
- Creating a federal insurance regulator and charter to improve financial stability and ensure appropriate regulation of insurance, and
- Ensuring independent funding for all financial regulatory agencies.
The recommendations are targeted primarily at federal regulators and Congress; however, several proposals can be adopted using existing statutory authority. “We need to create a streamlined structure with clear lines of authority and minimal duplication,” said co-chair Mark Olson. “This will ultimately improve the safety and soundness of the financial system, protect taxpayers, and ensure accountability by financial institutions.”
“Combining the banking regulation and examination efforts of multiple federal and state supervisors would lead to higher quality regulation and a stronger banking sytstem,” said co-chair Richard Neiman. “This is a ‘win-win’ proposal that would benefit our economy and the safety and soundness of our financial regulatory system.”
“We should not wait for another financial crisis before implementing the thoughtful, forward-thinking road map provided in this report,” said Aaron Klein, director of BPC’s Financial Regulatory Reform Initiative.
“These recommendations are bold and controversial,” said BPC President Jason Grumet. “Our intent is to spark the debate, critique and analysis that inform the next major revision to our system of financial regulation.”
This report is the fourth in a series on promoting financial stability and economic growth. Two additional reports are expected during the summer of 2014.