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Treasury calls for systemic risk designation leader at FSOC, Volcker changes in reform report

The first in a series of reports responding to President Donald Trump’s call for revisiting financial regulations was released Monday by the Treasury Department.

The report focuses on simplifying banking rules, reforming the Consumer Financial Protection Bureau and reviewing the activities of banking regulators. Unlike Dodd-Frank reform legislation passed June 8 by the House along party lines, the Treasury report does not call for shutting down the Financial Stability Oversight Council but recommends naming a lead official for the body’s systemic risk designation work.

The report calls for “substantial amendment” to the Volcker rule, including not subjecting banks with less than $10 billion in assets to it, and removing proprietary trading restrictions on larger banks, who would be allowed to “more easily hedge their risks and conduct market-making activities.”

Financial Services Roundtable CEO Tim Pawlenty said in a statement that the report “is an important step toward modernizing America’s financial regulatory system so both economic growth and consumer protection are advanced.”

Marcus Stanley, policy director at advocacy group Americans for Financial Reform, characterized the proposed changes as “a death by a thousand cuts.” Mr. Stanley, who said the ideas advanced in the report “have been pushed by industry lobbyists since Dodd-Frank was passed,” warned that most of the changes can be made by administrative action. “The Trump administration could unilaterally introduce major additional risks to our financial system,” Mr. Stanley said in a statement.

Treasury officials said the next step is working with Congress, financial regulators and industry groups to implement the recommendations by changing statutes, regulations and supervisory guidance. Three more reports are expected later this year that will focus on markets, liquidity, central clearing, financial products, asset management and innovation.

The report is available on the Treasury Department’s website.