U.S. FDIC wants limits on consumer finance agency authority
WASHINGTON, July 24 (Reuters) – The Federal Deposit Insurance Corp on Friday argued for limits on a new agency to protect consumers from risky financial products and warned against stripping consumer protection duties from bank regulators.
“Examination and supervision for safety and soundness and consumer protection need to be closely coordinated,” said FDIC Chairman Sheila Bair in prepared remarks to be delivered to Congress.
Bair said separating consumer protection from safety and soundness could weaken oversight of banks and said the two go “hand in hand.”
Bair said bank regulators should continue to examine and enforce standards but allowed for the so-called Consumer Financial Protection Agency to retain backup examination and enforcement authority to address any situation where it determines that a banking agency is providing insufficient supervision.
The Obama administration plan to create such an agency has been met with stiff opposition from business groups who fear over regulation of their products and services.
Bair said the consumer agency should have authority to write rules and federal banking regulators such as the FDIC should retain authority to supervise insured institutions.
Freeing the consumer agency from direct supervision of banks will allow it to focus its resources on firms that provide financial products and services that have not previously been overseen by federal regulators, Bair said in prepared remarks to be delivered to Congress.
The House Financial Services Committee is holding a hearing on Friday to examine the administration’s plan to overhaul the country’s regulatory system.
Bair said a FDIC representative should sit on the consumer agency’s board and said she would support adding the chairman of the new agency to the FDIC’s board.