Bank Regulation: Consolidation of the Regulatory Agencies

GAO discussed proposed legislation to consolidate the regulatory activities of the Office of the Comptroller of the Currency (OCC), Office of Thrift Supervision (OTS), Federal Reserve, and Federal Deposit Insurance Corporation (FDIC) and create a Federal Banking Commission. GAO noted that: (1) problems arising from four agencies' regulation of banks and thrifts include limited bank safety and soundness examinations, different examination and enforcement priorities, overlapping authority, and cumbersome interagency rulemaking procedures; (2) efforts to improve the effectiveness and efficiency of bank regulation should also address how the agencies perform their work; (3) the regulatory agencies need to implement and enforce the reforms that the Federal Deposit Insurance Corporation Improvement Act of 1991 requires; (4) FDIC needs the authority to examine problem institutions without obtaining approval from other regulators; (5) the Federal Reserve's role in monetary policy and the payments system could be seriously impaired if it lost its responsibilities for regulating and supervising bank holding companies and state-member banks; (6) recent legislation has addressed some concerns about the adverse impact of poor supervision of state-chartered banks; and (7) until the resolution of issues regarding the Federal Reserve's role, it would be logical to merge OTS, OCC, and FDIC regulatory responsibilities for state-charted banks that are not Federal Reserve members.