Mr Volcker said that reforming the regulatory structure was an unfinished task left over from the financial crisis as he warned that lending by non-banks — known as shadow banks — was creating unchecked risks. He called for the abolition of the Office of the Comptroller of the Currency, and for the merger of two markets regulators — the Securities and Exchange Commission and the Commodity Futures Trading Commission. Arguing that regulators continue to lag behind the growing size and complexity of financial markets, he said: “All the evidence is that the time has come to do something.”
Referring to shadow banking, he said: “At this point the non-bank markets are more important than the commercial banking markets and the fact that the regulatory structure doesn’t really reflect that is part of the problem.”
Mr Volcker was presenting a report from a government reform group he founded, the Volcker Alliance, which said that “failure to reorganise the regulatory structure will contribute to the build-up of systemic risk and make us more vulnerable to the next financial crisis”. He called for the creation of a new agency affiliated with the Fed that would write prudential rules and perform supervision currently done by the Fed, the OCC and a third bank regulator, the Federal Deposit Insurance Corporation.
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