Some US regulators worried about approach of coordination and global uptake of some parts of Dodd-Frank.
The Commodity Futures Trading Commission and the Securities and Exchange Commission have long been vocal about how well international coordination on financial regulation is going. Trouble is, coordination’s still a long way off and in some aspects of regulation – the Volcker Rule for instance – other countries are not really on board.
Jill Sommers, commissioner at the CFTC said in a speech to a group of international bankers Monday that she was “deeply concerned that there has not been adequate coordination with the SEC and the international regulatory community.” She added that of greater concern was the Commission’s apparent piecemeal approach to coordination by “proposing guidance in stages rather than by proposing one comprehensive rule that will give market participants some degree of certainty and the entire framework we are considering.”
Ms. Sommers, along with fellow Republican commissioner Scott O’Malia have consistently raised concerns about the process by which their agency is writing and implementing the rules. Commissioner O’Malia is most concerned about the lack of cost-benefit analysis of the impact of the rules.
Meanwhile at the same conference, Mary Miller, the US Treasury Department’s assistant secretary for financial markets, said she was concerned about the indifference some countries are showing parts of Dodd-Frank. In her speech she pointed to the Volcker Rule as one part of DFA where coordination isn’t a success. “The Volcker rule provides a good example of an area where the US is pursuing reforms to reduce risk and conflicts of interest, but where most other nations have not followed,” she said in written remarks.
Many US regulators are concerned that banks, traders and other groups could take advantage of gaps in the global regulatory system. Also, many fear companies based in certain countries could also gain an advantage if rules aren’t adopted in a consistent manner across the globe.
“Aligning the substance of the rules as much as possible is not enough,” Ms. Miller said in her remarks. “It’s also important to align the timing as much as possible, to avoid leaving gaps that present risks to financial stability in the interim as well as creating competitive advantages for institutions in jurisdictions that are not as far along the path of reform.”
This has been a topic of debate between the US and Europe for a while. Just about a year ago, there was a somewhat heated exchange between US Treasury secretary Tim Geithner and EU officials over the issue of countries not toeing the line on regulation. Secretary Geithner had suggested the UK and other European regulators might ease up – use a “light touch” – on their regulation to take business away from the US.
UK and European regulators vehemently denied this, but it all bears watching as Dodd-Frank continues its great grind forward.