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The Chamber’s Center for Capital Markets Competitiveness (CCMC) on Tuesday unveiled the next step in its campaign to defend America’s financial institutions and capital markets, a new agenda recommending eight reforms the Federal Reserve could take to be more transparent and accountable in its regulation of financial markets and the Main Street businesses that rely on them.
The Federal Reserve should be independent in setting monetary policy, a belief long supported by the Chamber. But in the Fed's role as a supervisor of the banking system, there is concern regarding its lack of transparency and due process when creating regulation. As the Fed continues to evolve under the broad powers it’s been granted under the Dodd-Frank Act, CCMC used yesterday’s event to provide a road map for the Fed to follow; a guide for how to use its regulatory authority to address systemic risk in a targeted, coordinated way that carefully considers the impacts actions have on American businesses and the overall economy.
You can read the full agenda here, but here's a brief look at the eight steps:
RECOMMENDATIONS TO INCREASE REGULATORY TRANSPARENCY AND ACCOUNTABILITY
- Create a transparent strategic regulatory plan. The Fed should be required to deliver an annual plan for its domestic and international regulation, as well as an annual report to Congress on its prior year performance and the plan for the upcoming year.
- Subject regulation to transparent, robust cost-benefit analysis. The Fed should be required to show its work – if it writes a regulation, tell the public what approaches it considered, why they were dismissed, and make public the cost-benefit analysis for the approach that was chosen. This should include an opportunity for public participation and periodic review of its rules.
- Tailor rules for non-bank systemically important financial institutions (SIFIs). When regulating non-bank financial institutions, the Fed should account for the business model of that institution. This is critically important when designating as systemically important companies whose business models are significantly different than those of traditional banks, such as insurance companies.
- Hold public meetings to consider regulations and international regulatory agreements. Other independent regulatory agencies like the Securities and Exchange Commission (SEC) are subject to the Sunshine Act, which gives the public a schedule and agenda for meetings in advance. The Fed should do the same.
RECOMMENDATIONS TO IMPROVE TRANSPARENCY AND ACCOUNTABILITY WITH GLOBAL REGULATORY BODIES
- Shine more light on interactions with the Financial Stability Board (FSB), the Bank of International Settlements (BIS), the International Association of Insurance Supervisors (IAIS), and the Basel Committee on Banking Supervision (BCBS). When working with international regulators, the Fed is signing on to international regulatory policies that require compliance from American businesses. The Fed should be required to notify Congress and the public before entering into international negotiations and provide regular updates to Congress during negotiations, as well as posting summaries of all meetings with its international counterparts.
- Consolidate examinations and data-collection with other regulators. U.S. companies are being supervised by an ever increasing number of agencies. These regulators should consolidate their requests to businesses for data and records, reducing the resources drain that prevents companies from generating economic growth.
- Fill the position of Vice Chair of Supervision. Dodd-Frank created this position to create more regulatory accountability for the Fed’s senior leadership, but it hasn’t been filled in more than five years. The president should nominate someone for Senate consideration immediately.
- Enter into memorandums of understanding (MOUs) with functional regulators. Businesses are subjected to working with a complicated web of regulators. Those regulators should ensure a coordinated and consistent regulatory approach and avoid unnecessary market disruption.
As the agenda lays out in its conclusion, “None of these recommendations would prevent or impede the Federal Reserve in executing its mission. We believe that the Chamber’s suggested reforms will make the Federal Reserve and other banking regulators more efficient in executing their mission.
“By adopting these recommendations, the Chamber believes that the Federal Reserve will benefit by ensuring that it can continue to regulate financial institutions under its jurisdiction and monitor and address systemic risk in a targeted and coordinated way while considering the impact on Main Street companies and the economy.”