‘New rules of the road’ for the financial system are required, says Treasury Secretary Timothy Geithner, who on Thursday outlined regulatory reform measures on behalf of the Obama administration. The framework aims to provide stronger tools to prevent and manage future financial crises, and rebuild confidence in the financial system, the Treasury says.
‘We need much stronger standards for openness, transparency, and plain, commonsense language throughout the financial system," Geithner told the House Financial Services Committee in written testimony. "And we need strong and uniform supervision for all financial products marketed to consumers and investors, and tough enforcement of the rules to ensure full accountability for those who violate the public trust."
The reform framework first targets systemic risk, but sweeping measures related to consumer and investor protection, elimination of regulatory structure gaps, and the fostering of international coordination are expected to be detailed further in coming weeks.
"The new rules must be simpler and more effectively enforced and produce a more stable system that protects consumers and investors, that rewards innovation and that is able to adapt and evolve with changes in the financial market,’ Geithner's testimony reads.
The Treasury points to the collapse of Lehman Brothers and continued governmental support of AIG as indications that "certain large, interconnected firms and markets" are in need of a more consistent and conservative regulatory regime.
Geithner's outline calls for a single independent regulator to have responsibility over systemically crucial firms; higher capital and risk management standards for such companies; a hedge fund adviser registration; comprehensive oversight, protections and disclosure for the Office of Thrift Supervision derivatives market; and new requirements for money market funds to reduce the risk of rapid withdrawals.