WASHINGTON -- A task force headed by Vice President Bush Friday recommended major simplification of the overlapping regulatory machinery that now covers the nation's 50,000 financial institutions.
In a final report called 'Blueprint for Reform,' after a year of work, the group made more than four dozen recommendations which have been approved by the president for submission to Congress early next year.
The proposals would greatly reduce overlapping jurisdiction under which many financial organizations now are subject to regulation by two or more federal agencies. States with advanced regulatory systems of their own would assume more control over state-chartered institutions.
One aim of the reform is to remove artificial advantages and disadvantages which banks, thrift institutions, insurance companies, securities firms and other financial institutions often face when they compete in the same services but come under different rules supervised by different agencies.
Under the present system, national banks are regulated by the Comptroller of the Currency. State-chartered banks that belong to the Federal Reserve System are regulated by both the Fed and the states. State-chartered banks which are not Fed members are regulated by the Federal Deposit Insurance Corp. and by the states.
More than half of all banks are owned by holding companies, which makes it even more complicated. Holding companies are regulated by the Fed and the Securities Exchange Commission. In most cases, banks are not regulated by the same agency that oversees their holding companies.
Under the task force proposals, a new 'Federal Banking Agency' would be formed within the Treasury, including and upgrading the Office of Comptroller of the Currency. It would regulate all national banks and, in most cases, their holding companies.
The Federal Reserve would handle all federal regulation of state-chartered banks and their holding companies. It also would regulate holding companies of the largest banks and those with significant international activities.
The FDIC would no longer be a primary bank regulator. It would remain an insurer of deposits, and it would have new examination and enforcement authority over troubled insured banks, regardless of their type of charter.
The Fed would transfer to the Treasury its authority to establish the permissible activities of bank holding companies, although it would maintain a veto right over new activities in certain circumstances.
Federal supervision of many state-chartered banks and thrift institutions would be transferred to state regulatory agencies which are deemed to be as rigorous as federal agencies. The report said, 'This will create new incentives for states to assume a stronger role in supervision.'