In June 2007, US Treasury Secretary Henry M. Paulson, Jr. announced that, as part of his initiative to strengthen US capital market competitiveness, the Treasury Department would undertake an examination of US financial regulatory structure with the goal of preparing a "blueprint" for an improved, modernized regulatory structure by early 2008. On October 11, 2007, in connection with its preparation of the "blueprint" for reform, the Treasury Department released a notice requesting public comment and input on an extremely broad range of issues affecting banks, securities firms, futures firms, insurance companies and other types of financial intermediaries. According to the notice, the blueprint will seek "a more effective regulatory structure that can adapt to the dynamic US marketplace while improving oversight."

The questions raised for public comment in the notice make it clear that the Treasury Department is at least willing to consider drastic, dramatic realignments of the current US financial services regulatory landscape. The Treasury Department's notice requests input on both general questions about the US financial regulatory system, as well as specific questions relating to the various sectors of the financial services industry. Some of the general issues addressed include the utility of the current system of "functional regulation," under which banking, securities, insurance and futures are primarily regulated by respective functional regulators. The notice also raises questions about the value of the current holding company supervisory models, the value of "principles-based" regulation as compared to the current rules-based approach and the lessons learned from recent regulatory restructuring in other countries (e.g., the single-agency approach followed in the UK, Japan and Germany versus the "twin peaks" model adopted by Australia and the Netherlands). The Treasury Department also seeks comments on the importance of global regulatory convergence and the extent to which issues of international competitiveness should influence the design of US regulatory initiatives.

In the area of regulation of depository institutions, the Treasury Department takes on long-standing "hot button" issues, such as the need for multiple charters, the utility of the dual-banking system, the need for the Federal Deposit Insurance Corporation and the Federal Reserve Board to have supervisory powers and the current bank and financial holding company framework. Among other things, the notice questions whether the current system involving four primary types of bank charters is appropriate and whether the merger of those charters should be considered. This perhaps signals that Treasury is open to consider the merger of its Office of the Comptroller of the Currency, which charters national banks and its Office of Thrift Supervision, which charters federal savings banks.

Treasury's notice also solicits input on insurance, securities and futures regulatory issues as well. The notice requests input on the current state-based system for regulating insurance companies in the US and whether the Federal government should be involved in the regulation of insurance. One such role contemplated by legislation currently pending before both the House of Representatives and the Senate would involve an optional Federal charter system for insurance companies. With respect to securities and futures regulatory issues, the notice focuses on the rationale for distinguishing between securities and futures products and their respective intermediaries and the need to have separate regulators (e.g., the Securities and Exchange Commission and the Commodities Futures Trading Commission) for these types of products and institutions.

The notice, which can be found here, requests comments on these and other issues by November 21, 2007. While the Treasury Department's "blueprint" for reform is scheduled to be released early next year, Treasury officials have acknowledged that any significant restructuring is unlikely to happen before the end of 2008.