Magazine article American Banker

States Defend Reg Role amid Calls for Pruning

Magazine article American Banker

States Defend Reg Role amid Calls for Pruning

Article excerpt

Byline: Emily Flitter

As yet another report Thursday called for fewer regulators, states said they were digging in to keep their authority over financial institutions.

The Government Accountability Office released a 107-page report urging policymakers to reform outdated regulation. Among other things, the report recommended a review of state regulation as part of an effort to come up with a leaner regulatory model.

Policymakers should "consider the appropriate role of the states in a financial regulatory system and how federal and state roles can be better harmonized," the GAO report said.

But the report came out as state regulators, worried ever since the Treasury Department last spring called for a study of the dual banking model, have been working on their own set of principles. The recommendations, due out soon from the Conference of State Bank Supervisors, warn policymakers not to forget the value of state regulation as they prepare for an overhaul of the system.

"What we're trying to convey here is the ability of state regulators to be much more nimble and knowledgeable, because we're close to the institutions," said Maryland Banking Commissioner Sarah Bloom Raskin, who chairs the bank supervisorgroup's task force on regulatory restructuring.

The group's one-page set of principles said state regulators should remain relevant in a "new era of cooperative federalism."

The principles also say that regulation should be specific to an institution's size; consumer protection standards should be tailored to fit both state and federallychartered institutions; and a reformed system should "encourage a diverse universe of financial institutions as a method of reducing risk to the system."

John Ryan, the bank supervisor group's executive vice president, said policymakers need to be careful not to propose reforms that would leave states on the sidelines. …

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