Bank Oversight Structure

Proposals to consolidate U.S. bank regulatory agencies have raised questions about how other countries structure and carry out their bank regulation and central bank activities. In five recent reports, GAO reviewed how banks are regulated and supervised in Canada, France, Germany, Japan, and the United Kingdom. Although each country's oversight structure and approach reflects a unique history, culture, and banking industry, GAO believes that aspects of these foreign regulatory systems may be useful for Congress as it considers how to modernize bank oversight in the United States. This report draws on the findings from the five reports already mentioned, as well as other GAO work on the U.S. financial regulatory system, to discuss (1) aspects of the five foreign systems GAO reviewed that may be useful for Congress to consider in any future modernization efforts, (2) perceived problems with federal bank oversight in the United States, and (3) principles for modernizing the federal oversight structure for U.S. banks.

GAO found that: (1) the five foreign banking systems reviewed had less complex and more streamlined oversight structures than the United States; (2) in all five countries, fewer national agencies were involved with bank regulation and supervision than in the United States; (3) in all but one of these countries, both the central bank and the ministry of finance had some role in bank oversight, and several of these countries relied on the work of the banks' external auditors to perform certain oversight functions; (4) in all cases, there was one entity that was clearly responsible and accountable for consolidated oversight of banking organizations as a whole; (5) the bank oversight structure in the United States is relatively complex, with four different federal agencies having the same basic oversight responsibilities for those banks under their respective purview; (6) industry representatives and expert observers have contended that multiple examinations and reporting requirements resulting from the shared oversight responsibilities of four different regulators contribute to banks' regulatory burden, and that the federal oversight structure is inherently inefficient; (7) having one agency responsible for examining all U.S. bank holding companies, with a different agency or agencies responsible for examining the holding companies' principal banks, could result in overlap and a lack of clear responsibility and accountability for consolidated oversight of U.S. banking operations; and (8) any modernized banking structure should provide for clearly defined responsibility and accountability for consolidated and comprehensive oversight, independence from undue political pressure, consistent rules, consistently applied for similar activities, and enhanced efficiency and reduced regulatory burden.

Recommendations

Our recommendations from this work are listed below with a Contact for more information. Status will change from "In process" to "Open," "Closed - implemented," or "Closed - not implemented" based on our follow up work.

Director: Team: Phone: