Financial Update (Fourth Quarter 2009)

Fed Chair Bernanke Outlines Pillars of Regulatory Reform

photo of Fed Chairman Ben BernankeIn congressional testimony in early October, Federal Reserve Chairman Ben Bernanke listed five key elements that he believes should be included in a broad agenda for financial regulatory reform:

  • Legislation to ensure that systemically important financial firms—whether or not they own banks—are subject to effective consolidated supervision.

  • An oversight council consisting of agencies involved in financial supervision and regulation. That council, Bernanke said, should have a mandate to monitor and identify emerging risks to the stability of the financial system, to identify gaps incurrent regulation, and to coordinate the agencies’ responses to possible systemic risks.

  • A new process that would enable the government to wind down a failing systemically important financial institution. "Importantly, this regime should allow the government to impose losses on shareholders and creditors of the firm," Bernanke said.
    Text of speech
    Federal Reserve banking and regulation information
    Federal Reserve consumer information

  • Systemically important payment, clearing, and settlement arrangements should come under "consistent and robust oversight and prudential standards."

  • Consumers should be protected from unfair and deceptive practices in financial transactions.

"Taken together," Bernanke told members of the U.S. House Committee on Financial Services, "these changes should significantly improve both the regulatory system's ability to constrain the buildup of systemic risks as well as the financial system's resiliency when serious adverse shocks occur."


October 28, 2009