At a recent regulatory shindig in Washington (again, DC rather than Tyne and Wear), Citigroup chairman Michael O’Neill called for America’s banking regulators to merge into a single banking watchdog and referred to the current fragmented regulatory regime as a “spaghetti junction”. At the moment, US banks are overseen by a mixture of the Federal Reserve, the Federal Deposit Insurance Corporation and the Office of the Comptroller of the Currency, as well as other smaller state-based regulators. Mr O’Neill knows whereof he speaks: this year alone, the Fed rejected Citigroup’s “stress-test” capital plan, saying that the bank didn’t have a grip on how to handle risk across its global operations, while an accounting fraud on Citigroup’s Mexico subsidiary Banamex has raised concerns at the Securities and Exchange Commission and the Justice Department. He told his audience – consisting mainly of regulators, so you can’t accuse him of cowardice – that he could not see the added value in multiple agencies bringing charges over a single violation, except perhaps to show that the government is not soft on banks: “To be fair, they do make efforts to coordinate, but each has its own interests – not to mention different terms and timetables.” He was of the view that a single bank regulator would benefit both banks and regulators by clarifying focus and conserving resources by eliminating “expensive and unnecessary duplication”. However, past efforts to consolidate US financial regulators have failed. A fellow speaker at the event, former Commodity Futures Trading Commission chairman Gary Gensler, suggested that it is good to have multiple regulatory agencies because they can keep obscure products from falling through the cracks.
Ordinarily events in America are of academic interest only, as I do not work there, but this is topical because I understand that there are those who think – indeed, recommend – that Guernsey and Jersey should share a single financial regulator. Working in both islands as I do, I struggle to see how this could work, as the two jurisdictions have very different approaches to and appetites for various areas of financial activity (such as online gambling, and Bitcoin). But many of this blog’s readers work in those two jurisdictions, so what do you think? Would a single CIFSC (I’m guessing Channel Islands Financial Services Commission) work? Would you welcome standardisation and clarification, or do you value differentiation and competition?