On March 26, Treasury Secretary Timothy Geithner provided an overview of the Obama administration’s planned overhaul of the financial regulatory system to the Committee on Financial Services of the House of Representatives. The framework has four broad components:  

  • addressing systemic risk;
  • protecting consumers and investors;
  • streamlining the regulatory structure to eliminate gaps; and
  • fostering international coordination.  

Secretary Geithner’s testimony focused mainly on Treasury’s ideas for addressing systemic risk which has six main elements:  

  • creating a single independent regulator with responsibility over Systemically Important Financial Firms (SIFFs) and critical payment and settlement systems;
  • higher standards on capital and risk management for SIFFs;
  • requiring advisors to private pools of capital that exceed a certain size to register with the SEC and provide additional investor and counterparty disclosure;  
  • comprehensive oversight of the OTC derivatives markets, including requiring centralized clearing of many OTC derivatives, greater use of exchange traded instruments, increased reporting and recordkeeping and more rigorous eligibility and compliance requirements;  
  • increased regulation of money market funds; and
  • federal jurisdiction over resolution of non-bank financial firms that may pose systemic risks.  

Treasury has proposed draft legislation to address the last element, resolution of non-bank financial firms, and has promised to elaborate and provide more details on the other parts of the framework in the near future.