Treasury Issues Recommendations on Capital Markets Regulatory Reform

As part of its ongoing response to President Trump’s executive order outlining core principles for financial regulation, the Treasury Department issued an extensive report today outlining recommended regulatory changes to maintain the vibrancy of U.S. capital markets. The report’s recommendations — including many advocated by the American Bankers Association in its engagement with Treasury during this process — collectively reinforce the banking industry’s role in supporting well-functioning financial markets.

“These recommendations would promote economic growth by enhancing banks’ ability to serve their customers and reinforcing our industry’s role in supporting well-functioning financial markets,” said ABA President and CEO Rob Nichols. “Many of the recommendations in the report would make it easier to raise capital, meet the needs of bank customers operating domestically and abroad, and focus regulatory processes on effective supervision without harming the economy.”

The Treasury recommendations are focused on promoting access to capital for all types of companies, fostering robust debt and equity markets, tailoring regulations on securitized products, recalibrating derivatives regulation to promote efficiency and risk mitigation, addressing the roles of clearing counterparties and financial market utilities, rationalizing the capital markets regulatory structure and promoting greater transparency in global financial standard-setting.

In its own advocacy, ABA highlighted several issues related to liquidity, derivatives and other topics that were included in the final report. For example, Treasury recommended: expanding the definition of high-quality liquid assets under the Basel III liquidity measures; adjusting the leverage capital ratio to better reflect bank depositor behavior and derivatives risk; removing initial margin requirements for swap transactions with affiliates; maintaining the current threshold for swap dealer registration; revisiting the overbroad application of U.S. swaps rules to U.S. banks’ foreign branches; and revising the Volcker Rule to improve secondary market liquidity.