Regulatory Resurgence

The regulators are back — and with a vengeance.

Financial institutions that thought they were riding a deregulation wave in the late '90s are suddenly confronting a plethora of new rules issued in the wake of corporate accounting scandals and the September 2001 terrorist attacks.

Regulations either issued or proposed by the Securities and Exchange Commission, Financial Accounting Standards Board, New York Stock Exchange and Congress (via the Sarbanes-Oxley Act) make corporate governance a more complex — and potentially more litigious — exercise. The USA Patriot Act, meanwhile, dramatically ratchets up the requirements for banks to monitor and report suspicious activities of their customers.

This regulatory resurgence comes just three years after the landmark Gramm-Leach-Bliley Act freed banks at last from Depression Era-restrictions that had limited their ability to offer related financial services such as investment banking and insurance. Now, in a much-changed political and financial environment, the movement is toward more rather than fewer regulatory controls.

To help bankers understand this environment and how it affects their own institutions, Banking Strategies recently convened two distinguished panels of experts for roundtable discussions. The first dealt with corporate governance and financial reporting issues; the second with the anti-money laundering provisions of the USA Patriot Act. A unifying theme in both discussions was the need for bankers to master the new rules quickly and meet more stringent regulatory expectations. As one panelist put it, "This is a period where you have to take a more conservative tack. There's not a lot of tolerance in the system right now."

Copyright © 2003 by Banking Strategies, published by BAI.

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