Magazine article American Banker

Regulatory Conflicts Seen Better for Banking Than a Superagency

Magazine article American Banker

Regulatory Conflicts Seen Better for Banking Than a Superagency

Article excerpt

By SEIBERG, JARET

The spat between banking regulators and the Securities and Exchange Commission over loan-loss reserves has outraged bankers, who argue that securities regulators have no business interfering in a safety-and- soundness issue.

Yet several experts said such conflicts are actually healthy for the industry, and that the cure-a super-regulator with nearly unlimited authority-would be worse than the problem.

Under the current system, each regulatory agency has its own mandate. As a result, they are more focused and able to implement policy more consistently than a single, jack-of-all-trades supervisor.

"I'm of the creative-conflict school," said Karen Shaw Petrou, president of the industry consulting firm ISD/Shaw Inc. "It makes more sense than having a banking czar."

"Often the conflict in the airing of policy results in a better approach because it blunts zealousness," said David W. Roderer, a partner in the Washington office of the law firm Goodwin, Procter & Hoar. "That is what we saw here in the loan-loss issue."

It is just one of many instances in which government agencies with differing agendas have imposed conflicting requirements on the industry.

"We have regulated institutions that get told one thing on fair-lending by banking regulators and another thing by the Department of Justice," said William J. Sweet, a partner in the Washington office of Skadden, Arps, Slate, Meagher & Flom. "Things like this happen all the time, and yet our system seems to survive. …

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