About | HeinOnline Law Journal Library | HeinOnline Law Journal Library | HeinOnline
LOG IN
LOG IN

1 1 (January 3, 2017)

handle is hein.crs/govcbzt0001 and id is 1 raw text is: FF. Updated January 3, 2017 Introduction to Financial Services: Regulatory Relief Congress is considering whether to provide regulatory relief' in the area of financial services. This In Focus gives a broad overview of the policy tradeoffs inherent in relief and the forms that relief proposals could take. It does not cover specific proposals, but instead provides a framework for evaluating any proposal, whether it is targeted at banking, securities, derivatives, or insurance. CRS takes no position on specific regulatory relief proposals or the relative balance between costs and benefits achieved in the current regulatory structure. In determining whether to provide regulatory relief, a central question is whether an appropriate tradeoff has been struck between the benefits and costs of regulation. Benefits. Financial regulation has different objectives and potential benefits, including enhancing the safety and soundness of certain institutions; protecting consumers and investors from fraud, manipulation, and discrimination; and promoting financial stability while reducing systemic risk. A financial regulatory system that delivers a baseline level of stability and trust between financial agents is a precondition to a healthy financial system that can generate robust economic growth. Regulators employ different tools to achieve these goals. Regulators issue rules; supervise and examine institutions to verify that the rules are followed; and take enforcement actions, such as imposing fines, when the regulations are not followed. In other cases, regulators require companies or individuals to meet certain standards and receive a license before engaging in a particular business practice. The specific goals regulators attempt to achieve and the tools they use vary by market. For example, risk management is emphasized for banking regulation and disclosure is a priority in securities regulation. Costs. The costs associated with government regulation- rulemaking, supervision, and enforcement-are referred to as regulatory burden. Regulatory requirements are often imposed on providers of financial services, so financial institutions are often the focus of discussions about regulatory burden. But costs associated with regulation can flow through the providers and ultimately be borne, in part, by different entities, including financial institutions, consumers, the government, and the economy at large. For example, a provider may respond to increased regulatory burden by raising the prices it charges to customers. If regulatory burden reduces the long-term availability of credit, it would have a negative effect on business investment and economic growth. Regulatory burden may manifest itself in different forms. Operating costs are the costs the company must bear in order to adhere to the regulation, such as employee training. Some regulations create one-time operating costs borne upfront while others are recurring costs that exist so long as the requirement is in effect. Opportunity costs are the costs associated with foregone business opportunities because of additional regulation. A lender may, for example, make fewer mortgages because new regulations make mortgage lending more expensive and instead perform a different type of lending that is now more profitable. My central theme has been that good regulatory and supervisory policies should implement congressional intent in ways that maximize social benefits and minimize social costs. - Federal Reserve Chairman Ben Bernanke, 2006 Tradeoffs. Regulatory relief may face tradeoffs between reducing regulatory burden and potentially reducing the benefits of regulation. The tradeoffs are not limited only to the effects on the direct recipients of relief-usually the providers of financial services-but also to the effects on consumers, investors, particular markets, and market stability more broadly. The presence of regulatory burden does not necessarily mean that a regulation is undesirable or should be repealed. A regulation can have benefits that could outweigh its costs, but the presence of costs means, tautologically, that regulation causes regulatory burden. The concept of regulatory burden can be contrasted with the phrase unduly burdensome. Whereas regulatory burden is about the costs associated with a regulation, unduly burdensome refers to the balance between benefits and costs. For example, some would consider a regulation to be unduly burdensome if costs are in excess of benefits or the same benefits could be achieved at a lower cost. But the presence of regulatory burden does not mean that all regulations are unduly burdensome. Policymakers consider these tradeoffs and evaluate the broader effects of regulation that could be either positive or negative, such as how a requirement would impact innovation, the price of credit, and the availability of credit. For example, efforts to protect consumers against potential actions taken by banks may drive up the cost for a bank to provide certain services and result in that activity migrating to a less regulated part of the financial system or to foreign jurisdictions with lower regulatory standards. However, tradeoffs are not always present. If regulation makes an unstable system more stable, it could reduce cost and increase the availability of credit. .O 'T gognpo 'popmm- , goo g , q 'S a X 11LULANJILiN,

What Is HeinOnline?

HeinOnline is a subscription-based resource containing thousands of academic and legal journals from inception; complete coverage of government documents such as U.S. Statutes at Large, U.S. Code, Federal Register, Code of Federal Regulations, U.S. Reports, and much more. Documents are image-based, fully searchable PDFs with the authority of print combined with the accessibility of a user-friendly and powerful database. For more information, request a quote or trial for your organization below.



Short-term subscription options include 24 hours, 48 hours, or 1 week to HeinOnline.

Purchase Access

Contact us for annual subscription options:

Contact Us

Already a HeinOnline Subscriber?

Log In

profiles profiles most