Fed will propose rules to regulate ‘significant firms'
Guidelines to help authority identify risks
Washington: Federal Reserve Chairman Ben S. Bernanke said the central bank plans to propose regulations within the next few months for firms whose failure may endanger the financial system.
"We anticipate putting out a package of proposed rules for comment this summer," Bernanke said in testimony prepared for a Senate Banking Committee hearing Wednesday on the progress of the Financial Stability Oversight Council. The rules will cover areas including "enhanced" capital requirements and annual Fed stress tests, pursuant to the Dodd-Frank Act of 2010.
Bernanke, whose remarks were published on Wednesday, is scheduled to testify along with Sheila Bair, chairman of the Federal Deposit Insurance Corp.; Acting Comptroller of the Currency John Walsh; Gary Gensler, chairman of the Commodity Futures Trading Commission; and Securities and Exchange Commission Chairman Mary Schapiro.
The FSOC, created by the Dodd-Frank Act and led by Treasury Secretary Timothy F. Geithner, is charged with identifying and monitoring companies whose collapse would threaten the financial system.
The SEC is conducting a "broad-based appraisal" of equity markets to determine whether rules have kept pace with developments in trading technologies and strategies, according Schapiro's prepared remarks. The SEC, which is soliciting comments on high-frequency trading and opaque markets, also has proposed requirements for reporting by bigger traders and recommended building a consolidated data system for market surveillance.
"These proposals would tremendously enhance regulators' ability to identify significant market participants, collect information on their activity, and analyse their trading behaviour," according to Schapiro's remarks.
The FSOC should use caution when responding to emerging risks in the banking system and deliberate "in a manner that assures" confidentiality, Walsh said in his prepared testimony.
These discussions "could undermine public and investor confidence and thereby create or exacerbate a potentially systemic problem," according to Walsh's testimony.
