Panel Begins to Set Rules to Govern Financial System

By EDWARD WYATT
NYT

WASHINGTON — The new regulatory board charged with overseeing the stability of the financial system took its first big steps on Tuesday to set out tentative guidelines to limit trading by banks for their own accounts and to restrict the growth of the biggest financial companies.

The Financial Stability Oversight Council, the grand council of financial regulators created by the Dodd-Frank Act, also proposed rules as to which large financial companies that were not banks would be regulated by the Federal Reserve because they constituted a potential threat to the nation’s financial system’s stability based on their size.

It is likely to take several days for Wall Street to wade through and decipher many of the implications of the recommendations, which were embedded in reams of studies, reports and regulatory filings released simultaneously Tuesday afternoon. Among the four documents was a 79-page report on the Volcker rule, the ban on trading by banks for their own accounts that is named for Paul A. Volcker, the former Fed chairman who championed the idea, and 46 pages of proposed rules on regulating nonbank financial companies.

The recommendations made public on Tuesday are subject to revision based on public comments and the recommendations of various other state and federal regulatory agencies. But the proposals are among the most concrete steps yet aimed at preventing financial institutions from becoming “too big to fail” and at keeping tabs on insurance companies and other companies whose activities could endanger the American economy.

(More here.)

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