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WBK Industry News - Federal Regulatory Developments

Treasury Releases 3rd Report on the Administration’s Core Principles for Financial Regulation

The Department of the Treasury recently released its Third Report on the Administration’s Core Principles for Financial Regulation which examines the current regulatory framework for asset management and insurance industries and makes recommendations to ensure that the regulatory framework is aligned with the Core Principles.  The Report is in response to Executive Order 13772, issued on February 3, 2017, which calls on the Treasury to identify laws and regulations that are inconsistent with the Core Principles set forth in the Executive Order.

Some Core Principles in the Executive Order include:

  • empowering Americans to make independent financial decisions and informed choices in the market place;
  • fostering economic growth and vibrant financial markets through a more rigorous regulatory impact analysis that addresses systemic risk and market failures;
  • enabling American companies to be competitive with foreign firms in domestic and foreign markets; and
  • making regulation efficient, effective and appropriately tailored.

With these Principles as guidelines, the Treasury’s Report focused on four key areas: (1) the proper evaluation of systemic risk, (2) ensuring effective regulation and government processes, (3) rationalizing international engagement, and (4) promoting economic growth and informed choices.

To summarize, the Report found that primary federal and state regulators should focus on an activities-based evaluation of systemic risk in the asset management and insurance industries, rather than an entity-based risk evaluation.  To promote efficient regulation and government processes, the Report recommends making the Federal Insurance Office’s work more effective by encouraging uniform product approval processes and standards at the state level, supporting the National Association of Insurance Commissioner’s work to establish uniform state laws for protecting consumer data, and improving the coordination and collaboration among federal agencies and state insurance regulators on insurance issues.

To strengthen U.S. participation in international forums, the Report recommends promoting U.S. asset management and insurance industries through a coordinated approach by the U.S. members of international forums, placement of appropriate domestic bodies in international forums to support policy development, and increasing transparency of domestic policymaking and international standard-setting processes.  Finally, to promote economic growth and informed choices, the Report supports the current efforts at the Department of Labor to reexamine the implications of the revised fiduciary rule and recommends delaying the full implementation of the Fiduciary Rule until the issues are evaluated and addressed to best serve retirement investors.  To promote robust investment in American infrastructure, the Report calls for a reevaluation of state insurance capital requirements and how those requirements may be better calibrated to encourage insurer infrastructure investment.

See the full text of the Report here, and see the Fact Sheet for the Report here.