Academic journal article ABA Banking Journal

The Battle for the Future of Banking

Academic journal article ABA Banking Journal

The Battle for the Future of Banking

Article excerpt

THE RIGHT KIND OF REGULATORY reform is every banker's dream. But the wrong kind of reform is every banker's nightmare. And that seems to be what the Obama administration has in mind for us. The president's plan for regulatory restructuring could be the most dangerous proposal we've ever seen. It poses a direct risk to your bank and it launches us on a battle for the future of banking.

As I travel across the country meeting with state associations, bankers tell me that the right kind of regulatory reform is an important priority. That's what ABA has been proposing.

ABA has been making the case for systemic risk regulation. We've urged that a method be developed to resolve systemically risky firms. We want to see a means to address the too-big-to-fail issue to minimize unfairness and risk in the system. And we want to close the regulatory gaps that allowed non-banks-the shadow banks--to create the problems we've all been confronting.

That's why we can support major parts of the administration's proposal. It calls for a systemic regulator, provides a mechanism for resolving systemically important firms and fills the gaps in the regulation of the shadow banking industry. That's the kind of regulatory reform that would address the principal causes of the financial crisis. And it would constitute major reform. The administration's proposal builds a strong foundation for debating these issues and moving forward on them.

But that's only one part of the plan. The rest of it puts the future of our industry at stake.

Consider the most dangerous part of the proposal-stripping away the consumer protection authority from the bank regulators and vesting it in a new Consumer Financial Protection Agency--the CFPA. It would have rulemaking, examination, and enforcement authority over consumer protection for financial products. …

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