Tuesday, June 16, 2009

Regulatory Reform Plan Expected Tomorrow

According to various published reports, the Obama administration is expected to release tomorrow its plan for financial regulatory reform. According to the reports, the plan is expected to include formally empowering the Federal Reserve Board as 'the' systemic risk regulator, working in concert with/under the advice and counsel of a council of regulators. Such a council - supported in early remarks by FDIC Chairman Sheila Bair and echoed by SEC Chairman Mary L. Schapiro, would presumably consist of the banking regulators, the SEC and CFTC (which, according to various reports, will not be merged at the present time under the plan to be announced tomorrow). A new 'Consumer Protection Agency' is referenced, although it is not clear yet what functions or types of transactions will necessarily be under that agency vs. the SEC; however some articles have stated that credit card and mortgage banking transactions would move from direct regulation by the banking regulators, to the new Consumer Protection Agency. See e.g. Details Set For Remake of Financial Regulations in yesterday's WSJ, and Obama to Propose Strict New Regulation of Financial Industry in today's LA Times.

Securitizations are also expected to be impacted by potential new regulatory requirements that sellers retain 5% of the risk as 'skin in the game,' as incentive to judge risk more closely rather than laying all the risk on others. See Treasury Plans Strict Rules for Securitization in today's FT, and Securities Revamp Has Its Doubters on the Street in today's WSJ.

According to various published reports, details of the Obama administration's regulatory reform plan are expected to be outlined in a 'white paper' - presumably to be issued by U.S. Treasury Secretary Tim Geithner - as distinguished from the 'blueprint' for regulatory reform issued by former U.S. Treasury Secretary Henry Paulson.

Separately, the private sector Committee on Capital Markets Regulation - nicknamed at its start a few years ago as the 'Paulson Committee' in light of support of its founding voiced by then-Treasury Secretary Paulson - recently issued its own set of updated recommendations. See this FEI summary for links to the CCMR report and 40-page Executive Summary, as well as an additional link to the 5-page summary of CCMR's 57 recommendations, found in Appendix I to their report.

Reports of the form and substance of the financial regulatory reform plan expected to be announced tomorrow began surfacing following remarks of National Economic Council Director Lawrence Summers at the Council on Foreign Relations on Friday, and U.S. Treasury Secretary Tim Geithner's statement to the G8 finance ministers on Saturday.

G8 Agrees on Lecce Framework
Some reports have said the Obama administration's plan may call for mechanisms to oversee work-outs of troubled institutions that pose systemic risk at the international level.

Groundwork was laid for international cooperation on broad principles of financial regulatory reform at Saturday's G8 meeting, by agreement of the finance ministers on The Lecce Framework, described further in this Treasury Department press release.

Of note in both the U.S. private sector Committee on Capital Markets Regulation report referenced above, and the G8 Lecce Framework, the subject of accounting (i.e. accounting standards and disclosure) is mentioned in both.

Collaborate, Innovate, Grow
As the private sector and government work to strike the right regulatory balance to adequately guard against risk, protect investors and depositors, and not stifle innovation, and as business and individuals endeavor to rise out of the global recession, the Maryland Association of CPAs (MACPA) has taken this to heart in the theme of their 2009 Maryland Business Expo: Collaborate, Innovate and Grow. Read some of the exciting things already underway here.

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