Market Analysis

U.S. President Barack Obama is expected to propose a plan of reorganization of the regulation of financial markets, which includes changes in the functions of the Federal Reserve System (FRS).

President then delivered to the Congress, which must be taken by appropriate legislation.

Goal - the total and effective control

gaps and weaknesses in the supervision and regulation of financial firms to represent the complexity of the capacity of our government to monitor, prevent or respond to risks when they occur in the system. None of the regulators is not intended to protect its economy and financial system as a whole . Existing approaches to the regulation of bank holding companies are focused on protection of bank branches, rather than on a comprehensive settlement of the whole. investment banks were allowed to choose between different modes by different regulators, and thus they can avoid adequate restrictions on leverage. Other companies, such as AIG, have insured deposits, but avoided serious regulation of holding companies, because of which they own and which hold deposits, banks are not formally under the law, - reported in the preliminary plan of the President of the United States.

We must create a new basis for financial regulation and supervision, which would be easier and work more effectively to protect consumers and investors, which will encourage innovation and to be able to adapt and evolve along with changes in financial markets - says the document.

Financial institutions that are crucial to the market, should be subject to rigorous oversight. No financial firm, which represents a significant risk to the financial system should not be unregulated or poorly regulated. We need clearer accountability for financial control and oversight - notes the report.

It is also proposed to give the Fed new powers to supervise all the firms whose collapse could have a significant impact on the stability of the financial system, even if they do not own banks.

Unified supervision of banks and food

Obama Administration proposes the creation of a single regulator to oversee all banks authorized by the Government, the so-called National Bank Supervisor. It will be formed as a separate agency within the Ministry of Finance and will assume the functions of the regulator of national banks Office of Comptroller, writes The Wall Street Journal.

With the help of a single banking regulator administration intends to close the gap in the current structure, which contributed to the current financial crisis.

The proposal generated criticism when it first introduced last year, Henry Paulson, the then Minister of Finance, as the banking sector benefits from competition among multiple regulators.

new regulator for banks could complicate the issue exotic mortgage bonds, which were widely circulated in the days of the boom in the housing market a few years ago.

Obama said that regulators should make sure that consumers understand what financial products they receive. But he said that will not go too far and would not, for example, restrict the rates on credit cards that offer to make some Democrats, noted in the article.

What is SEC

Commission on Securities and Exchange Commission (SEC) and Board of Trade commodity futures USA (CFTC) must be clear, unimpeded power to protect and prevent fraud on the derivatives markets, also in the U.S. President.

SEC should be given expanded powers to demand from companies for greater transparency in disclosing information to investors, says the document.

Earlier, senior administration officials said that the Government plans to regulate and standardize the supervision of all derivatives nebirzhevymi register hedge funds and other private pools of capital.

The plan the president also noted that one of the most significant problems in the securitization market is the lack of sufficient incentives for lenders and sekyuritizatorov to examine changes in the characteristics of the basic credit after the issuance of securities secured by the assets. Creditors and sekyuritizatory have little incentive to study the quality of basic assets, which sekyuritiziruyutsya, - says the paper.

Also, according to a preliminary version of the plan, SEC should continue its efforts to strengthen the regulation of credit rating agencies.

Credit rating agencies should differentiate the credit ratings that they assign the structured credit products, from those they assign structured debt. Credit rating agencies must also publicly disclose the changes in assessments of credit ratings for structured credit products in such a way as to facilitate comparison of products and credit ratings and to provide meaningful evaluation of uncertainties and potential volatility associated with credit ratings - described in the document.

Insurers

U.S. administration is not forgotten, and the insurance companies. According to the presidential plan of the Ministry of Finance will set up a new unit to coordinate policies with regard to state-regulated insurance sector, writes the WSJ.

It will collect information about the insurance industry and to monitor international agreements. Also, it will be authorized to consult with the Federal Reserve and Federal Deposit Insurance Corporation (FDIC) on insolvent insurers, if they need to help the state.

Ministry of Finance will support reforming the current system of insurance regulation, it is noted in terms.

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