The Republican Party gets a second chance from the U.S. electorate – but what does this mean for the huge regulatory change agenda and for banks and other highly regulated industries?
Most think that the provisions outlined in Dodd-Frank will proceed as planned, although there might be some slow down and changes. Implementation is largely in the hands of the executive branch and agencies such as the SEC. In a Reuters.com article published yesterday, House Republican leader John Boehner suggests a more cautious approach to changes in financial services regulation will be taken compared to that of the healthcare bill – but advocates more rigorous oversight.
A second big question that remains to be answered is around enforcement of these new financial services regulations. Whilst the mandate towards higher scrutiny may continue, under the change in control the budget might not be there to support it. Does this mean that regulation will have to rely more on self enforcement and inspection than was previously envisioned?
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No one can afford to relax because of the change of control . Risk management is probably a game played to the referee’s whistle , not to the state of the rulebook at any particular time . The referee in this instance is not just the regulator : US and world public opinion , and the market structures and systems involved , could not withstand another Lehmann at this time , whether or not the potential defaulter was operating within existing rules . So alongside the regulatory framework there are expectations of good practise and public responsibility that banks and financial institutions ignore at their peril . And that has always been so in all markets in capitalist societies , until heady moments of peak performance drive some individuals and companies to ignore all rules – either legislative or borne of acknowledged good practise . In the current period of anxious recovery , Congress dragging their heels on re-regulation is unlikely to dent the determination of many players to have controls and monitoring systems in place which pass the test of public opinion and investor expectations , at least until the next phase of market upturn .
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