Fischer laments lack of coordination between US regulators

Financial supervision in the US suffers because of a unique lack of coordination between the US's myriad regulators, Federal Reserve vice-chair Stanley Fischer warned today (July 17).

"More coordination would be very useful," Fischer said, during remarks at an event hosted by the US Chamber of Commerce. Members of the chamber had complained that in having to deal with four or five different regulators, they are often given conflicting instructions.

"It's a pity from the viewpoint of the system that we cannot be as coordinated as other countries are," Fischer said. He noted there were plenty of different approaches, and powers need not be held by the central bank. But the systems in most countries show a higher degree of cooperation, he said.

Fischer saw a small reason for hope in the Financial Stability Oversight Council (FSOC), set up as part of the Dodd-Frank Act in a bid to make regulators work together better. "We are trying to make the FSOC work, it is beginning to work," he said.

The FSOC is designed to take a macroscopic view of financial stability, and brings together the leaders of nine regulators, plus an insurance specialist appointed by the US president.

Thomas Donohue, president of the Chamber of Commerce, suggested the Fed ought to "step up and lead" in uniting the fragmented regulators, via its strong position on the FSOC. Fischer just smiled and declined to comment.

Other efforts are under way to create a better coordinated and more streamlined regulatory framework in the US. In April 2015, former Fed chair Paul Volcker unveiled plans for a stripped back and more closely united set of regulators – with the Fed taking a central role.

Under the plan, put forward by the so-called Volcker Alliance, the Office of the Comptroller of the Currency would be scrapped and the Securities and Exchange Commission merged with the Commodity Futures Trading Commission. A new prudential regulator would handle supervision, and the Fed would oversee the overall operation.

It is not clear how practical the suggestions actually are and, commenting more generally, Fischer said he was pessimistic about the ability for legislation to achieve change. "I understand efforts were made to get more coordination among regulators and possibly to reduce the number of regulators," he said. "And they failed, politically."

"It would need someone very determined and, indeed, with the political power to make that happen," he added.