Obama Administration Announces Comprehensive Plan for Regulatory Reform
The Obama Administration has announced a comprehensive plan for regulatory reform of the financial services industry. The plan, entitled “A New Foundation: Rebuilding Financial Supervision and Regulation” was announced by President Obama and Treasury Secretary Geithner at the White House on Wednesday, June 17, 2009. The Plan, presented in an 88 page White Paper, sets forth five separate initiatives: requiring strong supervision and appropriate regulation of all financial firms; strengthening regulation of core markets and market infrastructure; strengthening consumer protection; strengthening powers to effectively manage failing institutions; and improving international regulatory standards and cooperation. The White Paper is available here.
The White Paper was accompanied by fact sheets covering each of the five separate initiatives, as follows:
1. Requiring Strong Supervision and Regulation of All Financial Firms – creates a financial oversight council of the heads of the eight principal federal financial regulators, charges the Federal Reserve with authority and accountability for the largest bank holding companies, sets higher standards for all financial holding companies (including executive compensation standards and enhanced firewalls), creates a new national bank supervisor resulting from the merger of the OCC and OTS into a single agency, and requires advisors to hedge funds and other private pools of capital to register with the SEC. The link to this fact sheet is here.
2. Strengthening Regulation of Core Markets and Infrastructure – strengthens supervision of securitization markets, brings comprehensive regulation to markets for all over-the-counter derivatives (including credit default swaps), retains the SEC and CFTC as separate agencies with enhanced powers and responsibilities, and strengthens oversight of systemically important payment, clearing, and settlement systems by giving stronger powers to the Federal Reserve. The link to this fact sheet is here.
3. Strengthening Consumer Protection – creates a new independent agency with full authority to protect consumers across bank and non-bank firms with authority to supervise and examine institutions and enforce compliance, establishes new disclosure requirements for consumer transactions, reforms mortgage laws (including a single integrated federal mortgage disclosure) and requires enhanced accountability of banks, non-banks, and independent mortgage brokers. The link to this fact sheet is found here.
4. Providing the Government with Tools to Effectively Manage Failing Institutions – imposes more stringent capital, activity, and liquidity requirements on large interconnected firms, requires prompt corrective action of these firms should their capital decline, requires rapid resolution plans for all large interconnected firms, and provides a regulatory regime that can adequately respond to a financial crisis. The link to this fact sheet is here.
5. Improving International Regulatory Standards and Cooperation – seeks to level the playing field to subject foreign financial firms operating within the US to the same standards as US firms, promotes higher international standards, reforms crisis prevention and management authorities and procedures, and enhances supervision of internationally active financial firms. The link to this fact sheet is here.
The proposal now heads to Capitol Hill where legislation is expected to be introduced promptly. Troutman Sanders will be monitoring the legislation as it works its way through Congress and is pleased to assist clients regarding all aspects of this plan for regulatory reform of the financial services industry.
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