Securities and Exchange Commission chairman Christopher Cox and Federal Reserve System chairman Ben Bernanke have signed a memorandum of understanding between the two agencies that will de
Securities and Exchange Commission chairman Christopher Cox and Federal Reserve System chairman Ben Bernanke have signed a memorandum of understanding between the two agencies that will deepen their information sharing and co-operation, in a move designed to help prevent systemic clearing and settlement failures in the US banking and securities industries.
Under the agreement, the Federal Reserve will get more information on securities firms’ capital and liquidity. The SEC and the Fed will share information and co-operate in areas of common interest including anti-money laundering, bank brokerage activities under the Gramm-Leach-Bliley Act, clearance and settlement in the banking and securities industries, and the regulation of transfer agents.
The agreement specifically covers bank holding companies and so-called consolidated supervised entities that own securities firms. It builds on and formalises longstanding co-operative arrangements between the SEC and the Fed, as well as more recent co-operation on matters such as banking and investment banking capital and liquidity following the US central bank’s emergency opening of credit facilities to primary dealers.
‘This agreement represents a valuable co-ordination of the roles of the SEC and the Fed in our capital markets,’ Cox says. ‘Years ago, when the dividing lines between commercial and investment banking were bright, the high level of co-ordination we are establishing today was not a priority for the US government. But today, the interconnectedness of mortgage and lending markets, credit derivatives, securitisations, and counterparty relationships requires the government to adopt a more coherent and co-ordinated approach.’
‘Just as with our similar arrangement with the CFTC, this agreement will permit the expanded sharing of information on a confidential basis, and help ensure that regulated entities receive a coherent message from Uncle Sam. This is smart government. We look forward to enhancing our collaborative relationship with the Fed within the formal framework covered by the agreement.’
The organisations say the memorandum of understanding will bolster the SEC’s role as primary supervisor of consolidated supervised entities and primary dealers, and improve the ability of the Federal Reserve to monitor the stability of the financial system. They argue that the importance of their co-operation has been highlighted by the recent stress in the financial markets affecting commercial and investment banks and other market participants.
The SEC recently entered into a similar memorandum of understanding with the Commodity Futures Trading Commission. An agreement between the SEC and the US Department of Labor is expected later this year.
