An idea left on the cutting room floor of the Dodd-Frank Act was a plan to consolidate the Securities and Exchange Commission and Commodity Futures Trading Commission into a single regulator. Abandoned as too controversial, it seems a modest proposal compared to the sweeping regulatory changes suggested by a Washington think tank.

In a new report, the Bipartisan Policy Center is recommending that Congress consider a sweeping consolidation of government agencies “to make better sense of the fragmented U.S. financial regulatory system.” Among the recommendations from its Regulatory Architecture Task Force:

Creating a new Prudential Regulatory Authority would consolidate the supervisory and examination authority of the Office of the Comptroller of the Currency, Federal Deposit Insurance Corporation, and Federal Reserve into a unified prudential regulator.

The Federal Reserve Board would be recast as the primary macro-prudential supervisor, responsible for overseeing financial market trends, activities, products, and practices that might pose a systemic risk to financial stability. Its oversight would apply to banks falling under a new threshold for systematically important financial institutions of $250 billion in assets.

Making joint rule-writing more efficient and timely by empowering the Financial Stability Oversight Council to override member agencies in unresolved rulemaking disputes.

Establishing the Office of Financial Research as a fully independent agency outside the Treasury Department to better identify risks to the financial system.

Creating a new Federal Insurance Regulator (FIR) to improve the regulation and supervision of insurance companies that elect to hold a new national insurance charter, which would be mandatory for insurance companies that are designated as SIFIs and optional for other companies.

Giving all agencies independent and equitable funding by removing their funding from the congressional appropriations process.

The report was authored by Richard Neiman, former New York State Superintendent of Banks and member of the congressional Troubled Asset Relief Program (TARP) oversight panel; and Mark Olson, former Governor of the Federal Reserve Board and former chairman of the Public Company Accounting Oversight Board.

To improve the quality of bank examinations, the report also advocates for the creation of a pilot program for a consolidated examiner force for federally insured banks. Over time, this approach would enhance supervision and improve the caliber of examiners through continuing specialized training and higher compensation. Specialized undergraduate and master's degree programs for bank examiners are cited as a way to raise the profile and skill level of that profession.

Topics