Bush Task Group Statement
The Task Group on Regulation of Financial Services, chaired by Vice President George Bush, with Treasury Secretary Donald Regan as vice chairman, today unanimously endorsed a proposal to substantially reorganize the federal agencies that regulate commercial banks.
The proposal adopted by the task group, whose members include the heads of all seven federal financial regulatory agencies, would constitute a sweeping revision of the federal regulatory system for commercial banks. The proposal would strengthen the current supervisory system, while greatly simplifying and streamlining compliance burdens for regulated firms.
While none of the existing agencies would be eliminated, the proposal would substantially revise the current allocations of authorities among the three federal agencies that currently regulate banks and significantly reduce overlap and duplication.
The task group's proposed revision of the federal financial regulatory system is also designed to complement the legislation proposed by the administration (currently incorporated in omnibus legislation introduced by Sen. Jake Garn, R-Utah) concerning broadened powers and services for holding companies of depository institutions and simplified procedures under the Bank Holding Company Act. 'The Most Comprehensive Revision'
Vice President George Bush told the task group at its final session:
"Taken as a whole, the task group's regulatory proposals, together with the administration's pending legislation concerning product deregulation, would represent the most comprehensive revision of federal law affecting financial institutions in the last 50 years. This comprehensive reform would significantly benefit the public by reducing unnecessary waste and inefficiency, encouraging innovation and competition, and putting the overall regulatory structure in a position to protect the integrity and stability of financial markets over the coming decades."
The task group's recommendations call for the creation of a new agency, the Federal Banking Agency, within the Treasury Department, with the current Office of the Comptroller of the Currency as its nucleus. The Federal Banking Agency would be responsible for regulating all national banks, with approximately 60% of aggregate U.S. bank deposits.
In addition, the Federal Banking Agency would assume from the Federal Reserve Board the authority to regulate the holding companies of all national banks, except for a limited number of the very largest institutions whose holding companies would remain subject as they are today to board superivision. This would include approximately 35 holding companies of national banks among such firms. Responsibility for Definitions
Another significant proposal adopted by the task group would fundamentally alter the responsibility for defining and interpreting the nonbanking activities that bank holding companies can engage in under applicable legislation. This responsibility is currently exercised solely by the board.
Under the new system, the board's current authority to define permissible nonbanking activities would be transferred entirely to the Federal Banking Agency, which would exercise such responsibilities for all bank holding companies in the United States.
The board could disapprove regulations of the Federal Banking Agency that establish or implement the so-called laundry list of permitted activities but only if the board of governors determined by a 2/3 vote that any such activity would be likely to undermine the stability of the entire U.S. banking system or have a seriously adverse effect on safe and sound financial practices.
Proposals to streamline regulatory procedures for bank holding companies as currently included in the administration's proposed Financial Institutions Deregulation Act were also endorsed and recommended by the task group. Fed Member-Bank Duties Unchanged
Under the proposal, the board, which previously was responsible for federal regulation of more than 1,000 state-chartered member banks and all of the approximately 5,000 U. …