The fragmented U.S. system of financial regulation has not kept pace with major developments that have occurred in recent decades, and will likely fail to prevent future crises that could be as bad or worse if significant changes are not made, the Government Accountability Office said in a report released today.
“Making changes that better position regulators to oversee firms and products that pose risks to the financial system and consumers, and to adopt to new products and participants as these arise, would seem essential to ensuring that our financial services sector continues to serve our nation’s needs as effectively as possible,” stated the report, “A Framework for Crafting and Assessing Proposals to Modernize the Outdated U.S. Financial Regulatory System,” .
Regulatory goals and objectives must be clearly defined, the report said. Those goals include ensuring consumer protection, ensuring the integrity and fairness of markets, monitoring the safety and soundness of institutions and ensuring the stability of the overall financial system.
Policymakers should “carefully define jurisdictional lines and weigh the advantages and disadvantages of having overlapping authorities,” the report said.
Other goals outlined in the report include having a systemwide focus regardless of the source of the risk, allowing the regulatory system to be flexible and forward-looking so regulators can adapt to market innovations and changes in a timely way, eliminating overlapping federal regulatory missions where appropriate as well as providing consistent consumer and investor protection.
