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11 J. Banking Reg. 1 (2009-2010)

handle is hein.journals/jlbkrg11 and id is 1 raw text is: Editorial US regulatory reform Journal of Banking Regulation (2009) 11, 1-5. doi:10.1057/jbr.2009.17 The new Treasury Secretary Timothy Geithner published the Obama Administration's propo- sals for Financial Regulatory Reform based on A New Foundation on 17 June 2009.1 This follows Hank Paulson's earlier package of recommen- dations in 2008. While many had hoped for a substantial restructuring of the complex reg- ulatory system in the United States, the institutional reforms announced were limited. The Office of Thrift Supervision (OTS) was merged with the Office of the Comptroller of the Currency (OCC) to create a new National Bank Supervisor (NBS) within the Treasury with a separate Office of National Insurance (ONI) being set up within the Treasury. No attempt was made to merge the Securities and Exchange Commission (SEC) and Commodity Futures Trading Commission (CFTC) with the existing roles of the Federal Deposit Insurance Corporation (FDIC) and National Credit Union Administration (NCUA) being retained and that of the Federal Reserve strengthened as the systemic supervisor. Two new agencies were created with a Financial Services Oversight Council (FSOC) to oversee systemic supervision and a sepa- rate Consumer Financial Protection Agency (CFPA) to monitor consumer products includ- ing mortgages and credit cards. Rather than simplify, the proposals may only further complicate the US regulatory structure.2 While the Obama Administration had originally proposed more substantial reform, Geithner had to accept the strength of the opposition on Capitol Hill.3 The Financial Regulatory Reform paper accepts that the crisis had many causes and went back decades. Financial intermediaries and investors had become complacent after years without a serious economic recession.4 It was also admitted that the government could have done more to prevent many of the problems and the resulting financial instability.5 The authorities were concerned to attempt to restore con- fidence in the integrity of the financial system and to build a new foundation for financial regulation based on five key objectives of improved oversight and control of financial firms and financial markets, consumer protec- tion, financial crisis management and interna- tional cooperation. Each of these objectives is considered further below. IMPROVED SUPERVISION AND REGULATION OF FINANCIAL FIRMS The system had been unable to deal with the crisis that arose following a credit boom and housing bubble and then significant de-leveraging and credit contraction.6 The system for the supervision and regulation of financial firms had to be made more robust with a number of entities that posed a signi- ficant risk to the financial system being unregu- lated or poorly regulated. The new FSOC would be created7 with the Federal Reserve being given additional authority to oversee the activities of any systemically sensitive firm (referred to as a 'tier 1 Financial Holding Company' (FHC)).8 Higher capital and other prudential standards would be imposed on all banks and bank holding companies.9 A new © 2009 Macmillan Publishers Ltd. 1745-6452 Journal of Banking Regulation Vol. 11, 1, 1-5 www.palgrave-journals.com/jbr/

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