SIFMA’s Ryan Kicks Off Annual Meeting

By Lisa Valentine

The Securities Industry and Financial Markets Industry (SIFMA) CEO Tim Ryan kicked off the association’s annual meeting in New York last week by getting right to SIFMA’s position on several issues. First, the U.S. needs a newly created systemic risk regulator. Second, the U.S. needs a newly created resolution authority for those institutions too big to fail.

Ryan lamented the lack of a single regulator in the U.S. that has oversight in all markets. This single regulator should have the authority to “set capital requirements, determine leverage ratios, consider liquidity restrictions and determine which business activities are appropriate.” However, Ryan sidestepped the issue of whether or not the systemic regulator should have say over executive compensation, noting instead that “others have suggested that compensation rules might be an appropriate tool as well.”

SIFMA disagrees with Bank of England governor Mervyn King who has suggested that one answer to the too big to fail dilemma is to cut large institutions down to a smaller size, said Ryan. Instead, SIFMA would prefer a new resolution authority that takes the best of the Federal Deposit Insurance Corporation (FDIC), the agency charged with dissolving banks (and which has had a good deal of practice this year) and combine that expertise with creditor protections outlined in the current Bankruptcy Code.

The Obama adminstration takes a different view: its proposals seek to protect the rights of depositors insured under the FDIC rather than protect the rights of creditors.

Because the FDIC is experienced in winding down banks but not other types of complex financial institutions, SIFMA recommends including the Federal Reserve and other regulatory agencies such as the SEC in any decision making.