New Report: 2009 Legislative, Regulatory Priorities

Aite Group Study Looks at How Government Will Respond to Current Fiscal Crisis What new regulations will the new administration bring to financial institutions in the New Year, and how far will lawmakers go to fix the problems that caused the current financial crisis?

These are the key questions tackled by the latest report from Aite Group, "Legislative and Regulatory Responses to the Financial Crisis."

Consumer lending, risk management and deposit relationships are studied in the context of the current political season. Aite Group analyst Eva Weber, author of the report, says "Whereas just months ago concerns about economic conditions were theoretical and abstract, they are now practical and concrete." She adds regulators on all levels are scrambling to identify problems, plug any holes, and define their roles as defenders of the public good.

To hear more insights from Weber, listen to this interview on the new study.

Looking Ahead to '09

Lawmakers are feeling the pain of consumers and will take action to change the "hands off" approach to banking regulations, she notes. "We will see a fundamental shift in respect to the last 10 years, where we saw a laissez-faire approach to lending practices, particularly among mortgage brokers. This approach wreaked disaster and not just on paper. Consumers are suffering, mortgages are underwater unemployment is rising. Consumer confidence is in question."

First, Weber sees lawmakers taking a more activist position in protecting consumers, and this study points to what this means for financial institutions in practical terms. She expects there will be a stronger response with more controls imposed, more measurement and management of risks and a shift toward consumer protectionism.

The only real question she sees is how far the pendulum will swing toward consumers, "but sweeping changes that favor consumers seem likely." Weber studied reports from legislative committees, lobbying and consumer protection groups to see where they stood on consumer protection, oversight of risk management practices as well as current regulator practices.

Some baseline recommendations that institutions should be looking at before regulatory changes come:

Consumer protectionism is rising; institutions need to be more proactive in making their own changes to how they protect customers.

Risk management at all financial institutions, both large and small, will need to be more focused, and a broader view of enterprise wide risk management is needed.

Internal processes around valuating credit and market risks will need to be stepped up

Lending practices will need to be scrutinized and tightened, if needed.

Consumer-facing disclosures such as privacy notices will need to be reviewed and changed, if needed.

About the Author

Linda McGlasson

Linda McGlasson

Managing Editor

Linda McGlasson is a seasoned writer and editor with 20 years of experience in writing for corporations, business publications and newspapers. She has worked in the Financial Services industry for more than 12 years. Most recently Linda headed information security awareness and training and the Computer Incident Response Team for Securities Industry Automation Corporation (SIAC), a subsidiary of the NYSE Group (NYX). As part of her role she developed infosec policy, developed new awareness testing and led the company's incident response team. In the last two years she's been involved with the Financial Services Information Sharing Analysis Center (FS-ISAC), editing its quarterly member newsletter and identifying speakers for member meetings.

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