Thursday, May 28, 2009
Committee on Capital Markets Regulation Sets Forth Recommendations for Regulatory Reform
On May 26, the Committee on Capital Markets Regulation released The Global Financial Crisis: A Plan for Regulatory Reform. The complete report, as well as the Executive Summary, is available at its website. Here is an excerpt from the Executive Summary:
Several key themes emerge from our Report. The first theme is that our goal
must be effective regulation. Although we recommend introducing regulation in some
previously unregulated areas, the crisis has shown that the most precarious sectors of
our financial system are those already subject to a great deal of regulation—regulation
that has proven woefully ineffective. Our call to advance effective reform means that
new or revised regulations should be based on solid principles—chief among them
being the reduction of systemic risk. A second theme of this Report is the need to
increase investor protection through greater transparency in the financial system. More
information enables the market to price assets, risk, and other relevant inputs more
accurately. Much of the present crisis can be attributed to a lack of critical information
(and perhaps, in some cases, misinformation). The necessity of building a U.S. financial
regulatory structure able to achieve these goals is a third theme of this Report. Simply
put, our regulatory structure must be entirely reorganized in order to become more
integrated and efficient. A final theme is that a global crisis demands a global solution.
The U.S. financial system is best viewed as an integral part of the overall global
financial system. No longer can the United States regulate in a vacuum. Coordination
with other national regulators and cooperation with regional and international
authorities is required.
The Report goes on to set forth 57 specific recommendations for reform.