The federal government should create a single, independent regulatory agency to oversee the nation’s financial system, taking on roles now handled by the SEC, CFTC, FDIC, and the offices of the Comptroller and Thrift Supervision, according to a report by the Committee on Capital Markets Regulation.
“Simply put, our regulatory structure must be entirely reorganized in order to become more integrated and efficient,” said the report.
Under the recommendation, the new agency, which the committee called the U.S. Financial Services Authority would regulate all aspects of the financial system, including “market structure and activities and safety and soundness for all financial institutions.”
The report also recommends that the Federal Reserve expand its authority to be the nation’s sole regulator of “matters pertaining to systemic risk.”
“Although we recommend introducing regulation in some previously unregulated areas, the crisis has shown that the most precarious sectors of our financial system are those already subject of a great deal of regulation — regulation that has proven woefully inadequate,” according to the report, “The Global Financial Crisis, A Plan for Regulatory Reform.”
“Our call to advance effective reform means that new or revised regulations should be based on solid principles — chief among them being the reduction of systemic risk.”
The report also recommends a registration requirement for hedge funds to confidentially report information to the government “relevant to the assessment of systemic risk.”
“The committee believes that any new regulation of (private equity firms) — beyond an information collection requirement to demonstrate that the fund operates as a traditional buyout fund — would be difficult to defend intellectually, and thus believes such regulation would be undesirable,” the report adds.
The committee comprises 25 key financial industry leaders, including Robert C. Pozen, MFS Investment Management chairman; Kenneth C. Griffin, president and CEO of Citadel Investment Group; and Wilbur L. Ross Jr. , chairman and CEO of WL Ross & Co.
The full report is available on the committee’s website, www.capmktsreg.org.
