WSJ: U.S. Financial System Still at Risk, Says IMF
The International Monetary Fund says the U.S. financial system is "slowly recovering," but remains vulnerable to crisis, in part because Congress and the administration have failed to streamline a regulatory system marked by turf battles and overlapping responsibilities.
"We asked many times why bolder action could not be undertaken," said the IMF's Christopher Towe, who oversaw the agency's first broad review of the U.S. financial sector.
Administration officials have argued that proposals to eliminate regulatory agencies would have become bogged down in Congress, saying higher priorities included a procedure to shut systemically important institutions that run into deep trouble.
The IMF said the U.S. system, where the Federal Reserve, Federal Deposit Insurance Corp., and state regulators share responsibility for regulating U.S. banks, and where the Commodities Future Trading Commission and Securities and Exchange Commission tussle over regulating futures markets, made coordinating oversight and uncovering new risks difficult.
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The new Financial Stability Oversight Council, charged with uncovering and defusing systemic risks, could also be hampered, the IMF said.
A senior Treasury official said the administration's financial overhaul improved oversight by making "regulator shopping" nearly impossible, as the Fed has the lead role in overseeing systemically significant institutions.
The IMF also conducted a stress tests of banks in the U.S., though it didn't grade individual institutions. Its simulation found that if the U.S. economy fell into recession again, banks overall could have to raise as much as $76 billion to have an adequate capital cushion.
"The numbers are not frightening," said Mr. Towe, but they suggest "supervisory agencies need to be mindful" of lurking problems.
The Treasury official said the IMF largely pointed out problems in regional and smaller banks that have heavy exposure to commercial real-estate loans. In adverse circumstances, regional banks would have to raise a total of $8 billion to $13 billion, which he called a "drop in the bucket" compared with the more than $200 billion raised by U.S. banks since the U.S. Treasury carried out its own stress tests last year.
