Improving Financial Regulation

The Systemic Risk Council is committed to addressing regulatory and structural issues relating to systemic risk in the United States. The goal is to help ensure a financial system in which we can all have confidence.  It is essential that policymakers show leadership through a strong and coordinated rule-writing process that promotes the development of cohesive, consistent regulations and provides clear and transparent explanations of the reforms in a way that is understandable to the general public.

The SRC has called on the Financial Stability Oversight Council to:

  • Expedite determination and designation of all systemically important nonbank financial institutions (SIFIs) and rules for capital requirements, resolution planning, examination and data collection to avoid a repeat of the 2008 financial crisis where risk-taking in the “shadow sector” caused widespread damage to the financial system.
  • Activate a fully functioning OFR data collection and analytics system, including the integration of data collected by individual FSOC agencies.
  • Expedite analysis and resolution of the challenges in applying the Volcker Rule with the goal of simplifying the regulation, while maintaining appropriate market making and risk management activity.
  • Complete consistent rule-makings for greater oversight and transparency in the OTC derivatives market, including centralized clearing of and use of execution facilities for standardized contracts, robust margining and capital requirements, position limits, and other measures necessary to address harmful speculation and systemic contagion, including the credit derivatives markets.
  • Focus on the need for international coordination of prudential and functional regulators, including the sharing of data, to ensure that global policymakers are aware of growing threats to financial stability.

The SRC has also released a statement calling for prompt, full and fair funding for the Securities & Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC).

The SEC and CFTC have long been the nation’s two primary defenders of honest and fair markets in securities and futures.  In addition, the two agencies have been given critical new responsibilities under the Dodd-Frank Act for regulating the enormous and previously unregulated over-the-counter derivatives market, which has been estimated to exceed $300 trillion in notional amount in the United States and about $650 trillion worldwide. They cannot carry out these responsibilities without substantial increases in funding. These agencies, however, have been plagued by uncertain, and often frozen, budgets.  Freezing these agencies’ budgets, even temporarily, effectively hamstrings them and hinders their ability to reduce systemic risks which threaten the stability of the financial system and the economy. Congress should act promptly to provide the SEC and the CFTC with the increases in funding needed to police Wall Street and protect the financial system.