State banking regulators are asking Congress and the Obama administration to keep states involved in monitoring the most important financial institutions.
Joseph Smith Jr., the North Carolina banking commissioner, testified in favor of making room for state regulators today during a hearing on Obama administration financial services proposals that was organized by the House Financial Services Committee.
The Obama administration has proposed creating a Financial Services Oversight Council that would include all current federal financial services regulators and would have jurisdiction over all “Tier 1 financial holding companies” — financial holding companies that are so large or so tightly woven into the fabric of the economy that their failure could bring down the financial system.
Smith, who appeared on behalf of the Conference of State Bank Supervisors, Washington, said state regulators are often the first to spot emerging trends and threats.
“An oversight council that does not include some mechanism for state involvement will not be informed by this knowledge and proximity,” Smith said.
One way to keep state regulators in the loop would be to equip the proposed FSOC with state liaison committee similar to the state liaison committee that now advises the existing Federal Financial Institutions Examination Council, Smith said.