Federal Reserve Gov. Daniel Tarullo on Tuesday said some countries will decline to follow the U.S. in adopting limits on proprietary trading at banks and other regulatory restrictions scheduled to be signed into law this week by President Barack Obama.
“There are aspects of the Dodd-Frank Act that are unlikely to become part of the international financial regulatory framework,” Mr. Tarullo testified at a Senate banking subcommittee hearing on international financial cooperation.
Mr. Obama plans to hold a signing ceremony Wednesday enacting the toughest set of U.S. financial market rules in seven decades. The legislation was passed by Congress last week.
“In the United States, activity restrictions have long been a part of the bank regulatory regime,” Mr. Tarullo said. “Many other countries follow a universal banking model and are unlikely to adopt the sorts of activity restrictions contained in the act.”
The bill, known as the Dodd-Frank Act, creates a consumer bureau at the Fed, a council of regulators to monitor firms for systemic risk to the economy and a mechanism for liquidating large financial firms whose collapse could threaten economic stability.
The legislation also prevents the Fed from approving bank acquisitions that would result in a firm exceeding 10% of the total liabilities of the U.S. banking system, Mr. Tarullo said. “Other countries with more concentrated banking systems are unlikely to impose this type of concentration limit on financial firms in their jurisdiction.”
“Not all elements of financial reform can be designed on a national level in a way that is perfectly consistent across countries,” he said.
