Lack of Coordination by Financial Regulators

The subtitle of the latest GAO report on Financial Regulation - Complex and Fragmented Structure Could Be Streamlined to Improve Effectiveness - is a good summary of their findings. From the view of the financial entities that are being regulated the entity may fall under the regulatory authority of multiple regulators who don't always communicate with each other. As a result, there are inconsistencies in how regulators oversee similar types of institutions. The report cites three examples:

• Depository institutions. Inconsistencies in examination activities of the depository institution regulators can result in different conclusions regarding the safety and soundness of an institution and difficulties identifying emerging trends.
• Securities and derivatives markets. Securities and derivatives markets have become increasingly interconnected, and regulation of these markets by separate agencies has created challenges. For example, regulation of entities that engage in similar activities is at times duplicative and at other times nconsistent.
• Insurance. Insurance regulation is primarily state-based, and a lack of uniformity, including inconsistencies in the licensing of insurance agents and the approval of insurance products, has resulted in uneven consumerprotection and increased costs to insurers.

Congress created Financial Stability Oversight Council to thwart another Great Depression by its response to systemic risks.  However, its recommendations are not binding and do not guarantee regulatory response.