from Financial Regulatory Forum:

US Treasury says consumer watchdog benefits banks

February 23, 2010

    WASHINGTON, Feb 23 (Reuters) - Setting up a separate U.S. consumer financial watchdog will not only improve regulation of banks but also be more efficient for taxpayers, a senior U.S. Treasury Department official said.
   Assistant Treasury Secretary Michael Barr, in remarks prepared for delivery on Tuesday to the Credit Union National Association, said banks would benefit from having consumer protection responsibilities handled by an agency separate from those that handle banking regulation.
   "Dedicating consumer markets regulation to a fully accountable agency will give banks and credit unions a more predictable regulatory environment," he said. "Institutions will have more certainty, which will make it easier to build a sustainable business."
   Excerpts from Barr's remarks to the credit union group were made available under embargo on Monday night.
  His comments come as the Treasury tries to urge Senate lawmakers to look for common ground on tightening financial regulation in the wake of the crisis that helped drive the United States economy into recession in late 2007.
   One obstacle to an agreement is the Obama administration's proposal for a Consumer Financial Protection Agency, envisioned as a powerful, independent agency that could shield consumers from predatory mortgages and abusive credit cards.
   Republicans dispute the need for such a new agency, as do some participants in the U.S. financial industry for fear that it might threaten profits.
   Barr said that existing practices, in which banking agencies also handle consumer protection, leads to overspending to ensure that banks and credit unions follow the rules but lets non-bank financial firms off the hook.
   "The federal government spends at least 15 times more on consumer compliance and enforcement for banks and credit unions than for nonbanks, even though there are at least five times as many nonbanks as there are banks and credit unions," he said.
   "Separating consumer market oversight from bank supervision will go a long way toward correcting this misallocation of federal resources."
   Barr said it might also help correct situations in which regulators, reluctant to take actions that might damage bank profits, delay steps against questionable consumer practices until public outrage forces their hand.
   "Delays in addressing failures of consumer markets is deeply damaging to banks and credit unions, not just consumers," Barr said. "Separating consumer market and bank prudential functions would help resolve these structural problems and, ultimately, strengthen safety and soundness."
   In pressing their case for a separate consumer watchdog agency, Democrats are aiming to undermine Republican opposition by pointing to similar proposals made by the George W. Bush administration.
   A March 2008 proposal, for example, envisaged three separate agencies to look after market stability, prudential regulation and consumer protection. (Reporting by Glenn Somerville; Editing by Jan Dahinten) ((glenn.somerville@thomsonreuters.com; +202-236-1498; Reuters Messaging: glenn.somerville.reuters.com@reuters.net))
Keywords: US FINANCIAL/REGULATION
  
Tuesday, 23 February 2010 05:00:13RTRS [nN22220991] {C}ENDS

from Financial Regulatory Forum:

US’ Geithner pushes for independent consumer agency

February 22, 2010

WASHINGTON, Feb 22 (Reuters) - The Obama administration is still fighting for a single, independent consumer financial protection agency, U.S. Treasury Secretary Timothy Geithner said on Monday as lawmakers haggled over a financial reform bill.

from Financial Regulatory Forum:

Bank of England’s King says UK, US closer than EU on regulation

February 12, 2010

It's closer across the Atlantic

It's closer across the Atlantic

 (Updates with more quotes, details from report)

LONDON, Feb 12 (Reuters) - Britain and the United States are more convinced of the need to force banks to hold more capital than some big European nations, Bank of England Governor Mervyn King told the Council for Financial Stability last month.

from Financial Regulatory Forum:

Senators lift US financial reform talks back on track

February 12, 2010

Dodd snubs Shelby

Dodd snubs Shelby

   By Kevin Drawbaugh
   WASHINGTON, Feb 11 (Reuters) - In an unusual move that cut a senior Republican out of the loop, bipartisan U.S. Senate negotiations resumed on Thursday on financial regulation reform, a top priority of the Obama administration.
   Restoring momentum to an initiative that had begun to lose headway, Senate Banking Committee Chairman Christopher Dodd, a Democrat, said he was now discussing legislation with Senator Bob Corker, a first-term Republican member of the panel.
   "I am more optimistic than I have been in several weeks that we can develop a consensus bill to bring about the reforms the financial sector so desperately needs," Dodd said in a statement on his dealings with Senator Corker.
   Just six days ago, Dodd said he had hit an impasse with Senator Richard Shelby, the committee's top Republican, in talks that had dragged on for more than a year over tightening oversight of banks and capital markets.
   President Barack Obama has made financial regulation a top priority for 2010, along with governments in the European Union, which are also hammering out new rules meant to prevent a recurrence of the recent global financial crisis.
   One of Obama's key proposals -- creating an independent U.S. Consumer Financial Protection Agency (CFPA) to regulate mortgages and credit cards -- had torpedoed the Dodd-Shelby talks.
   Giving no ground in response to Dodd's move, Shelby drew a firm line on the issue in a statement late on Thursday.
   Shelby supports reforms to end the notion that some financial firms are "too big to fail," to find new ways for the government to deal with failing firms and to regulate derivatives, Shelby spokesman Jonathan Graffeo told Reuters.
   He said Shelby also wants to enhance consumer protection "without subordinating the safety and soundness of our financial institutions," a position that the senator has staked out before in opposing Obama's watchdog agency.
  
   CORKER SAW 'TRAIN WRECK'
   The U.S. Treasury Department said it welcomed Corker's decision to work with Dodd to pass financial reform.
   Senate Majority Leader Harry Reid told reporters, after Dodd's announcement, that he was "comfortable we are going to be able to do a really good financial regulation bill."
   Corker said on Thursday he wants to cooperate with Democrats on finding bipartisan agreement. He told Reuters Insider in an interview that the Dodd-Shelby impasse would have led to "a legislative train wreck."
   But Corker has also opposed the CFPA. Last year, when Obama recommended creating it, the Tennessee Republican called the proposed agency "a tremendous overreach ... way out of bounds."
   In a statement late on Thursday, Corker said the CFPA "is probably the hot-button issue and Senator Dodd and I have agreed to set that topic aside for now."
   Echoing Shelby, Corker added: "Our goal should be trying to ... enhance consumer protection without negatively impacting the safety and soundness of our financial system."
   The CFPA would be a new agency centralizing consumer protection laws and staff that are now scattered across several existing government agencies, including the Federal Reserve.
   Democrats back the idea because they say the Fed and other agencies did a poor job of protecting Americans from abusive mortgages in the run-up to the financial crisis of 2008-09.
   Banks and financial firms oppose the agency as a threat to their profits and a red-tape burden. Republicans say it would be an unneeded intrusion on business, and that separating consumer protection from bank supervision would be a mistake.
  
   HOUSE APPROVED WATCHDOG
   Adopting many proposals made by Obama in mid-2009, the U.S. House of Representatives in December approved a reform bill, calling for the most sweeping changes since the 1930s, over the objections of Republicans and Wall Street lobbyists. The bill included a provision establishing the watchdog agency.
   Dodd and Republicans have discussed, as a possible compromise, downgrading the CFPA to less than an independent agency, perhaps as a Treasury Department division. Consumer advocates and senior House Democrats oppose this approach.
   Democratic Senator Mark Warner, a banking committee member, told CNBC on Thursday that the debate on the consumer protection proposal is "a little bit thorny."
   He said financial reform is "too important to fail," and that he and Corker agree on 98 percent of another issue -- setting up a new government body to monitor and manage "systemic risk" in the economy and the financial system.
   Senator Tim Johnson, the second-ranking Democratic committee member after Dodd, said in a statement that Dodd's announcement on talks with Corker shows "there is bipartisan interest in completing financial services regulatory reform."
   He called the initiative "too important to push off or to become the target of political games."
  
   RELATED NEWS
   * FACTBOX-20 ways US Senate, House financial reforms differ, please double-click on [ID:nN11153798] ((Additional reporting by Rachelle Younglai, Karey Wutkowski, Glenn Somerville, Donna Smith and Kim Dixon, Editing by Gary Crosse)) ((kevin.drawbaugh@thomsonreuters.com, +1-202-898-8390, +1-202-488-3459 fax)) ((Multimedia versions of Reuters Top News are now available for: * 3000 Xtra: visit http://topnews.session.rservices.com
    * BridgeStation: view story .134 For more information on Top News: http://topnews.reuters.com)) Keywords: FINANCIAL REGULATION/ 
  
Thursday, 11 February 2010 23:21:00RTRS [nN11240299] {C}ENDS

from Financial Regulatory Forum:

Big banks’ risky trading should be curbed-Volcker

February 2, 2010

volcker 2 WASHINGTON, Feb 1 (Reuters) - White House adviser Paul Volcker will urge Congress to curb the risks taken by large banks to help prevent them from being treated as "too big to fail," according to testimony obtained by Reuters on Monday.
Detailing a recent proposal known as "the Volcker rule," the former Federal Reserve Chairman will tell lawmakers that commercial banks' proprietary and speculative activities should not be protected by the government.
He will also urge international consensus on "appropriate" actions to restrict commercial banks' activities.
Volcker -- an adviser to President Barack Obama whose star has risen in recent weeks -- will appear before the Senate Banking Committee on Tuesday to defend the administration's latest proposal to rein in the banks.
In January, Obama proposed limiting commercial banks' ability to engage in proprietary trading, to end their ties to hedge funds and private equity funds and to restrict the future growth of large banks beyond a new market share cap.
In his testimony, Volcker will say there are strong conflicts of interest inherent in participation by commercial banks in proprietary or private investment activity.
"I am not so naive as to think that all potential conflicts can or should be expunged from banking or other businesses," Volcker said in his prepared remarks.
"But neither am I so naive as to think that, even with the best efforts of boards and management, so-called Chinese walls can remain impermeable against the pressures to seek maximum profit and personal remuneration," he said.
Taken on board as an adviser early on by Obama, Volcker initially seemed to have not much of an impact in the administration. But that has changed since the Democrats lost a special Senate election in Massachusetts and Obama moved to a more populist stance, proposing new bank restrictions. (Reporting by Rachelle Younglai and Kevin Drawbaugh; Editing by Tomasz Janowski) ((rachelle.younglai@thomsonreuters.com; + 1 202 898 8411))
Keywords: FINANCIAL REGULATION/VOLCKER

from Financial Regulatory Forum:

Companies to disclose iffy tax estimates – IRS

January 27, 2010

By Kim Dixon

WASHINGTON, Jan 26 (Reuters) - U.S. tax authorities will soon demand that corporations reveal much more detailed financial information about tax shelters and other complex structures when they file their income taxes, the top U.S. tax official said on Tuesday.

from Financial Regulatory Forum:

US stock exchanges push for sub-penny pricing

January 26, 2010

By Jonathan Spicer

NEW YORK, Jan 26 (Reuters) - The major U.S. exchanges are considering asking regulators to allow price quotes in increments as small as one-tenth of a cent for some stocks, a move that could revamp trading fees and the flow of orders in capital markets.

from Financial Regulatory Forum:

Dutch to support U.S. bank plan, seek EU support

January 26, 2010

    AMSTERDAM, Jan 26 (Reuters) - Dutch Finance Minister Wouter Bos has backed the plan from U.S. President Barack Obama to limit the scope and size of banks and reduce their risk taking and will push to win support of the plan among EU leaders.
   Obama last week threatened to fight Wall Street banks with new proposals that would be the most far-reaching overhaul of the U.S. banking industry since the 1930s. The proposals still need congressional approval.
   Bos said in a letter to U.S. Treasury Secretary Timothy Geithner he agrees further steps are necessary, stressing that some of the financial institutions that were on the brink of collapse 14 months ago are, worryingly, again growing in size.
   "This jeopardizes the thin layer of regained trust of the general public in the financial sector, and as a result many of our combined efforts so far. This is unacceptable," Bos wrote in the letter made public late on Monday.
   He added the Netherlands was keen to discuss these issues with the United States and others in the G20 and will try and win support for Obama's views in Europe in the coming months.
   The Dutch financial sector was also hard hit by the credit crisis and the government nationalised the Dutch operations of Fortis and ABN AMRO for 16.8 billion euros, while also providing capital and guarantees to ING <ING.AS> and insurer Aegon <AEGN.AS>.
   Obama's shake-up proposals would prevent banks from investing in, owning or sponsoring a hedge fund or private equity fund and bar banks from proprietary trading. They also would set a new limit on banks' size.
   Major European economies had offered support last week to Obama's plan, but indicated they had no plans to follow suit.
   A European Union source had also told Reuters the EU would not imitate Obama's plan, because it aimed to reduce risk in the sector through other means. [ID:nLDE60L0UV] (Reporting by Aaron Gray-Block: Editing by Neil Fullick)
 ((aaron.gray-block@thomsonreuters.com; +31 20 504 5001; Reuters Messaging: aaron.gray-block.reuters.com@reuters.net))
Keywords: DUTCH BANKS/
  
Tuesday, 26 January 2010 07:31:53RTRS [nLDE60P04V] {C}ENDS

from Financial Regulatory Forum:

Obama’s bank plan could level high-frequency field

January 25, 2010

   By Jonathan Spicer
   NEW YORK, Jan 22 (Reuters) - President Barack Obama's plan to crack down on proprietary trading at big U.S. banks could spark a new rush of start ups, putting them on equal footing with the established independent trading firms that don't enjoy the backing of large financial institutions.
   The plan, unveiled Thursday, would fragment the so-called high-frequency trading that provides much of the buying and selling in U.S. markets. But that liquidity would likely remain at healthy levels, say traders, analysts, and investors.
   Besides the independent trading shops -- some of which have come to dominate equities and futures volumes in recent years -- hedge funds and private equity could also benefit if Obama successfully bars Wall Street banks from proprietary trading operations, unrelated to serving customers, for their own profit. [ID:nLDE60L1AS]
   "It shifts the profits from the banks to the prop trading independent firms, but I don't think it has a tremendous impact on liquidity," said Larry Tabb, chief executive of research and consultancy firm TABB Group. "In equity markets, if one player goes away there are twelve others to step up to the plate."
   Independent high-frequency trading firms emerged in force in recent years to take on banks in the world of proprietary trading, where bets on capital markets are made with the firms' own money, rather than executing trades on behalf of clients.
   Independent proprietary firms, including heavyweights Getco and Tradebot, represent about 46 percent of all high-frequency trading in U.S. equities, compared to 30 percent by broker-dealers, according to a December report by Boston consultancy Aite Group.
   The 15 largest independent firms alone account for 31 percent of overall high-frequency trading.
    In the months before and throughout the financial crisis, a flurry of independents launched to take advantage of the volatile markets, a lucrative rush that died down in the second half of 2009. The firms use rapid-fire trading programs to make markets and take advantage of tiny buy and sell imbalances.
   Obama's proposal would likely force banks to sell or spin off their high-frequency proprietary operations into stand-alone entities. [ID:nN21115923]
   That could spur traders to launch their own shops and help to level the playing field for today's independents.
   "It will definitely help the independent shops. It will create a more level playing field for everyone," said Louis Liu, founder and managing partner at Lotus Capital Management LP, a New York-based quantitative trading firm that uses high-frequency strategies.
   "Players will no longer have cheaper capital to make risky moves, some of which may not be warranted," said Liu, adding independent proprietary traders are more likely than those backed by banks to make less risky bets in the market.
  
   COULD RESHAPE ELECTRONIC TRADING
   Obama's plan is intended to limit the risk posed by massive financial institutions, but faces an uncertain political fate and would take years to come into effect.
   It also raises questions over how to differentiate proprietary trading from exchange-based market making at the targeted banks, which include Goldman Sachs Group Inc <GS.N>, Morgan Stanley <MS.N>, and JPMorgan Chase & Co <JPM.N>.
   Still, it has the potential to reshape electronic trading in the United States -- where regulators last week launched a probe of equities markets to determine whether high-frequency traders, which account for more than half of all volumes, have undue advantages. [ID:nN13156728]
   "If the plan goes through, I think you'll actually see more shops being opened up," said a partner at an independent high-frequency trading shop who requested anonymity.
   "I don't think the competition at banks will go away, but the talent in (the banks) will go into different places, or start their own firms," he said.
   James Ellman, president at San Francisco-based hedge fund Seacliff Capital, said it was unlikely a profitable bank proprietary desk will simply shut down under Obama's plan.
   "Either someone will want to buy that unit, or just as likely the guys that run that unit -- who know they've got a machine they just turn on every day and money spits out of it -- are going to want to (buy out) the thing," he said. (For more coverage of the proposed bank rules click: [ID:nN21658127]) (Reporting by Jonathan Spicer; Editing by Tim Dobbyn) ((jonathan.spicer@thomsonreuters.com; +1-646-223-6253; Reuters Messaging: jonathan.spicer.reuters.com@reuters.net))
   Keywords: OBAMA FINANCIALS/TRADING 
  
Sunday, 24 January 2010 13:00:13RTRS [nN22227263] {C}ENDS

from Financial Regulatory Forum:

Obama plan could hurt U.S. banks-Swiss banker

January 25, 2010

   ZURICH, Jan 25 (Reuters) - U.S. President Barack Obama's proposals to split traditional banking activities from riskier areas will harm U.S. banks without international co-ordination, a prominent Swiss banker said in Monday's Financial Times.
   While financial sector stability is crucial to the U.S. recovery, targetting its banks unilaterally could hit their perceived competitiveness, Patrick Odier, chairman of the Swiss Bankers Association, was quoted as saying.
   "Rather than breaking up institutions it could be more appropriate to make use of risk-adjusted capital requirements," he was quoted as saying.
   Odier, a senior partner at Geneva-based Lombard Odier, was upbeat on the outlook for Swiss private banking, and said adequate regulation had underpinned the robustness of the country's financial system.
   "I think the outlook is positive," he said. "The Swiss financial centre has done well during the crisis and weathered the turbulence much better than some others." (Reporting by Martin de Sa'Pinto; Editing by Greg Mahlich) ((zurich.newsroom@reuters.com; +41 (0)58 306 7462; Reuters Messaging: martin.desapinto.reuters.com@reuters.net))
 Keywords: OBAMA FINANCIAL/SWISS
  
Monday, 25 January 2010 06:51:13RTRS [nLDE60O037] {C}ENDS