NASAA and other regulators want in on systemic risk oversight

State financial regulators today urged Congress to set up a group of regulatory agencies to deal with systemic risk. A new “systemic-risk council” should be set up and include all federal and state banking, insurance and securities regulators, several state groups said today in a letter to the Senate Banking and House Financial Services committees. The joint letter was sent by the North American Securities Administrators Association Inc. and the Conference of State Bank Supervisors, both of Washington, and the National Association of Insurance Commissioners of Kansas City, Mo. A single agency should not be responsible for systemic risk, the state regulators said. The multiregulator council would minimize “the possibility of regulatory capture,” the letter said. “As a further measure against undue influence or capture, we believe the council should be headed by an independent chair,” the state regulators said. The council would require industry participants and other agencies to share information with it. But the council's power would be limited to making recommendations to those regulators with primary authority over the market sector in question, the letter said. The authority of existing functional regulators would remain intact under the proposal. The idea of a systemic-risk council has already been proposed by Federal Deposit Insurance Corp. Chairman Sheila Bair. Her proposal would have a single regulator oversee systemically significant firms but would couple that with a council of functional regulators. This month, Securities and Exchange Commission Chairman Mary Schapiro expressed support for Ms. Bair's proposal.