Financial Times: Volcker urges UK-style regulatory reforms

20 April 2015

Paul Volcker, former head of the Federal Reserve, issued a radical call for the US to follow the UK’s lead by streamlining its mishmash of financial watchdogs in order to close worrisome gaps in regulation.

Mr Volcker said that reforming the regulatory structure was an unfinished task left over from the financial crisis as he warned that lending by non-banks — known as shadow banks — was creating unchecked risks. He called for the abolition of the Office of the Comptroller of the Currency, and for the merger of two markets regulators — the Securities and Exchange Commission and the Commodity Futures Trading Commission. Arguing that regulators continue to lag behind the growing size and complexity of financial markets, he said: “All the evidence is that the time has come to do something.”

Referring to shadow banking, he said: “At this point the non-bank markets are more important than the commercial banking markets and the fact that the regulatory structure doesn’t really reflect that is part of the problem.”

Mr Volcker was presenting a report from a government reform group he founded, the Volcker Alliance, which said that “failure to reorganise the regulatory structure will contribute to the build-up of systemic risk and make us more vulnerable to the next financial crisis”. He called for the creation of a new agency affiliated with the Fed that would write prudential rules and perform supervision currently done by the Fed, the OCC and a third bank regulator, the Federal Deposit Insurance Corporation.

Full article (subscription required)


© Financial Times