Insights From Winston & Strawn
Monday, April 10, 2017
Posted by: CalALTs
Since January 20, there has been a flurry of activity at the White House affecting the regulation of financial services, including the issuance of six executive orders or memoranda.
One of those, as we have previously reported, enunciated seven core principles of financial services regulation, including empowering Americans to make independent decisions and informed choices; fostering economic growth and vibrant financial markets; enabling American companies to be competitive with foreign firms; and making regulation efficient, effective, and appropriately tailored. That executive order further directs the Treasury Secretary to consult with the member agencies of the Financial Stability Oversight Council (the “FSOC”). Those agencies include the Federal Reserve Board, Comptroller of the Currency, the Consumer Financial Protection Bureau (the “CFPB”), the SEC, the FDIC, the CFTC, the FHFA, and the NCUA. The Secretary is to report to the President in 120 days and periodically thereafter on the extent to which existing laws, regulations, and guidance promote the core principles, identifying those that inhibit regulation consistent with those principles.
This may be an opportunity to promote principles-based regulation and to get away from the detailed prescriptive regulation that has become commonplace and is evidenced by notices of adoption of final rules consisting of hundreds of, in some cases more than a thousand, pages of directives. It also may be an opportunity to promote genuine cost-benefits analyses of regulatory requirements. Examination criticism and even enforcement actions are sometimes based on standards that may never have been publicly enunciated by agencies or their staffs, let alone adopted after notice of, and opportunity for, public comment. The facts underlying the PHH case against the CFPB demonstrate a classic case of that. Standards governing acceptability of living wills have also been subject to that type of critique. Bank Secrecy Act/anti-money laundering regulation could use more transparent standards. Of course, this has also been a criticism of the FSOC process for designation of systemically important financial institutions. This also may be an opportunity to require agencies to respond to inquiries by regulated firms and to do so promptly to enable such firms to comply with agency wishes. READ MORE