The U.S. regulatory structure must be overhauled in response to the financial crisis, an industry research organization recommends.
The Committee on Capital Markets Regulation released a report Tuesday that proposes regulatory reforms that it believes would make the structure more integrated, more effective and provide better investor protection.
The report says the committee believes that an effective system must reduce systemic risk, increase disclosure, result in a unified regulatory system with clear lines of accountability and improved transparency, and it must seek international harmonization and cooperation.
The committee found that the financial system failed on all four fronts with regulation applied inconsistently across products and services, insufficient transparency to protect investors and support market discipline, fragmented supervision, and a lack of coordination on basic global rules.
It makes 57 recommendations to address what it sees as the system’s fundamental shortcomings, including proposals to reform capital requirements, create resolution procedures and other regulation for non-bank financial institutions, increase transparency and supervision around sophisticated financial instruments, and improve accounting standards.
The recommendations include creating a class of exchange-listed credit default swaps, requiring centralized clearing for most CDSs, adopting counter-cyclical capital ratios, disclosure on the status of banks through stress tests, strengthening leverage ratios, establishing a single insolvency regime applicable to all financial companies, consolidating regulation into two or, at most, three independent federal bodies to oversee the U.S. financial system, including a single systemic risk regulator.
“The financial crisis came about because there were too many gaps in our regulatory system where products and markets operated in the shadows. There was too much fragmentation and not enough daylight,” said John Thornton, chairman of the Brookings Institution and co-chairman of the committee. “Taken together, our recommendations derive from the goals of a unified regulatory system and a more transparent market.”
Glenn Hubbard, Dean of Columbia Business School and co-chairman of the committee, added, “We are optimistic that in the wake of the worst financial crisis in our lifetime, policymakers will embrace bold reform. In today’s politically charged atmosphere, the expertise and diversity represented on this committee make these recommendations uniquely independent and consensus-driven.”
IE
Group calls for overhaul of U.S. financial regulation
CCMR report makes 57 recommendations to address system’s shortcomings
- By: James Bagnall
- May 26, 2009 May 26, 2009
- 11:50