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March 31, 2008 - On March 31, U.S. Treasury Secretary Henry Paulson released a proposal to reform the U.S. regulatory structure. The “blueprint” calls for comprehensive changes to the current regulatory system and could have broad impacts on the nation’s supervisory structure affecting state regulatory agencies, state-chartered credit unions and the National Credit Union Administration (NCUA).
The blueprint presents short, intermediate and long-term recommendations for reform to the U.S. regulatory structure. A long-term recommendation would reorganize the financial regulatory system and combine the roles of the NCUA, the Office of the Comptroller of the Currency and the Office of Thrift Supervision into one prudential financial regulator. The new “objectives-based” regulatory approach would replace the current financial institution approach with three main regulators:
1) Market Stability Regulator - The Federal Reserve’s authority would be expanded to monitor risks across the financial system;
2) Prudential Regulator – Creation of a single regulator focused on safety and soundness of insured depository institutions including credit unions; and
3) Business Conduct Regulator – One main regulator to oversee consumer protection issues.
NASCUS is concerned about the proposal’s far-reaching implications, including preemption of state authority and state regulation of state-chartered institutions. In its November 2007 comment letter to the U.S. Treasury on regulatory reform, NASCUS stated its steadfast belief that the current system provides important regulatory competition, innovation and diversity.
“NASCUS will thoroughly review the proposal and continue working with Treasury and others to ensure that state authority is maintained over state-chartered institutions. It is the role of state governments to determine proper regulation of its state-chartered institutions including credit unions,” said NASCUS President and CEO Mary Martha Fortney. “The dual chartering system is threatened by the preemption of state laws and the push for uniformity.” Click here to read more about NASCUS' response to the report.
The short-term recommendations suggest changes to improve regulatory coordination immediately including modernization of the President’s Working Group on Financial Markets, clarification of the liquidity provisioning by the Federal Reserve and creation of a new federal commission for mortgage origination.
Secretary Paulson said March 31 in a press conference that the long term plans were secondary to resolving the current economic crisis. “Our first and most urgent priority is working through this capital market turmoil and housing downturn, and that will be our priority until this situation is resolved. With a few exceptions, the recommendations in this Blueprint should not and will not be implemented until after the present market difficulties are past,” stated Paulson.
To view a fact sheet of the report, click here. The full report can be downloaded from the Treasury’s Web site here.
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