One of the top priorities of the Administration is increasing economic growth by reducing regulatory burdens, and Treasury is playing a critical role in this effort. President Trump has directed Treasury to examine existing federal regulations, and financial-sector regulations in particular, to identify ways to decrease burdens on American businesses, and encourage job creation and wage growth for American workers. Secretary Mnuchin is working to accomplish these goals in a number of ways.
Identifying and Reducing Tax Regulatory Burdens
Executive Order 13789 directed the Secretary to review tax regulations that impose an undue financial burden on the taxpayer, needlessly complicate federal tax laws, or exceed IRS’s authority. In Treasury’s October report on this review, the Department announced that it would consider withdrawing or modifying several regulations. The full report on Identifying and Reducing Tax Regulatory Burdens.
Core Principles Reports Regarding Financial Regulation
Executive Order 13772 instructed the Secretary to assess whether the existing financial regulatory system promotes the Administration’s “Core Principles” of financial regulation, empowering Americans to make independent financial decisions, save for retirement, build wealth, and prevent taxpayer-funded bailouts. The Administration also aims to make regulation efficient, effective, and appropriate, and to promote American competitiveness at home and abroad. Treasury has begun to issue a series of reports to this end:
- Banks and Credit Unions Report: Treasury’s June 12 report detailed how capital, liquidity, and leverage rules can be simplified to increase credit flow. It recommended reforms to the Consumer Financial Protection Bureau and offered recommended methods to produce better tailored, more efficient, and more effective regulations. The report also underscored the importance of globally competitive banks and increasing market liquidity to the U.S. economy. The full Banks and Credit Unions Report.
- Capital Markets Report: Treasury’s October 6 report detailed how to streamline and reform the U.S. regulatory system for the capital markets. Treasury’s report identified numerous ways to reduce the burden on companies looking to go public or stay public, while protecting investors. These include streamlining disclosure requirements and tailoring them to company size; evaluating regulatory overlaps; incorporating more robust economic analysis and public input into the rulemaking process; and reviewing the roles, responsibilities, and capabilities of self-regulatory organizations. The full Capital Markets report.
- Asset Management & Insurance Report: Treasury’s October 26 report recommended ways to align the asset management and insurance industries with the Administration’s Core Principles for financial regulation. Treasury focused on four key areas: the proper evaluation of systemic risk, ensuring effective regulation, rationalizing international engagement, and promoting economic growth and informed choices. Its recommendations include: supporting activities-based evaluations of systemic risk; adopting a principles-based approach to liquidity risk management rulemaking; realigning the Federal Insurance Office’s role and supporting its coordination with state insurance regulators; and reducing duplicative and inefficient oversight. The full Asset Management & Insurance report.
- Nonbank Financials, Fintech, and Innovation Report: Treasury’s report, released on July 31, 2018, makes over 80 recommendations to create a regulatory landscape that better supports nonbank financial institutions, embraces financial technology, and fosters innovation. Treasury’s recommendations are designed to promote the efficient and responsible use of consumer financial data and competitive technologies, streamline the regulatory environment to foster innovation and avoid fragmentation, modernize regulations for an array of financial products and activities, and facilitate “regulatory sandboxes” to promote innovation. The full Nonbank Financials, Fintech, and Innovation Report. (A version of this document that is accessible to people with disabilities will be available soon. In the meantime if you need accessibility assistance, please call 202-622-2960.)
Financial Stability Oversight Council Designations
Treasury’s November 17 report recommended several improvements to the FSOC designation process designed to further the aims of rigorous and transparent analysis, market discipline, a level playing field for firms, and a tailored regulatory scheme. Treasury recommended that FSOC increase the analytic rigor of its determination analyses; engage more actively with both institutions under FSOC review and primary regulators; and provide a clear “off-ramp” for designated institutions. The full Financial Stability Oversight Council Designations.
Orderly Liquidation Authority and Bankruptcy Reform
Treasury’s report, released on February 21, 2018, responds to a Presidential Memorandum directing Treasury to propose recommendations to align the Orderly Liquidation Authority (OLA) with the Core Principles for Financial Regulation and determine whether the Bankruptcy Code should be reformed to better enable resolution of financial companies. Treasury's recommendations would ensure that taxpayers are protected by strengthening the bankruptcy procedure for a failed financial company and retaining OLA in very limited circumstances with significant reforms. The full OLA and Bankruptcy Reform Report.
Community Reinvestment Act Modernization
Treasury’s recommendations to modernize the Community Reinvestment Act (CRA) were released on April 3, 2018. The recommendations were issued to the primary CRA regulators, the Office of the Comptroller of the Currency, the Federal Reserve Board, and the Federal Deposit Insurance Corporation. Treasury’s objective in developing these recommendations is to better align CRA activity with the needs of the communities that banks serve, while being conducted in a manner consistent with a bank’s safety and soundness. The full CRA Memorandum.