Financial Research Advisory group to discuss Treasury plan to reform financial regulatory structure

Views on the Treasury Department’s June 2017 report about reforming the financial regulatory scheme will be the chief topic for a meeting next month of the group that provides financial research to the department and the Financial Stability Oversight Committee (FSOC).

According to preliminary filings with the Federal Register, the Office of Financial Research’s (OFR) Financial Research Advisory Committee will hold the public meeting Feb. 15 at the Treasury Building (Cash Room) beginning at 9:30 a.m. Seating is limited, and advance notification to Treasury about attendance is mandatory.

The notice for the scheduled meeting points out that this will be the 11th meeting of the committee. Topics slated for discussion, the notice states, “include the committee’s views on particular aspects of the United States Department of the Treasury responses to Executive Order 13772 on Core Principles for Regulating the United States Financial System.”

The 149-page report, issued June 12 by the Treasury Department, was in response to an executive order by President Donald Trump in February. The Treasury Department report laid out a case for financial regulatory reform that included banks, credit unions and federal agencies, including the CFPB.

Broadly, the Treasury report recommends that Congress take action on the U.S. federal financial regulatory structure; this is primarily aimed at reducing fragmentation. “This could include consolidating regulators with similar missions and more clearly defining regulatory mandates,” the report states. “Increased accountability for all regulators can be achieved through oversight by an appointed board or commission or, in the case of a director-led agency, appropriate control and oversight by the Executive Branch, including the right of removal at will by the President” (clearly referring to the Consumer Financial Protection Bureau, CFPB).

The report was criticized in a September letter from the “Systemic Risk Council,” a group that describes itself as an independent, non-partisan group formed to monitor and encourage regulatory reform of U.S. and global capital markets, with a focus on systemic risk. Its membership includes former Federal Reserve Board Chairman Paul Volcker (listed as a “senior adviser”), former FDIC Board Chair Sheila Bair (chair emeritus of the group), former U.S. Sen. Bill Bradley (D-N.J.), former Commodity Futures Trading Commission Chair Brooksley Born, former U.S. Secretary of the Treasury Paul O’Neill, and former Federal Reserve Board Vice Chair Alice Rivlin.

In a comment letter to Treasury, the group urged the Treasury to rethink some of its recommendations. In particular, the Council wrote that it is concerned that some of its report’s main recommendations would “jeopardize the resilience of the financial system, the public finances and the welfare of citizens.” That includes opposing an “off-ramp” that would exempt large and complex firms from other prudential regulations if they exceed a specified leverage ratio.

Notice: Financial Research Advisory Committee meeting (Feb. 15)