Last week, the head of the New York Fed William Dudley, echoed the chorus that is getting louder and louder. Namely, that our regulatory system needs a complete overhaul to deal with the systemic risk posed by our largest financial services institutions. According to Dudley,
We need a more effective regulatory system. We need a systemic risk authority that has both the responsibility and the powers to look across the entire financial system—both depository institutions and the capital markets.
One issue with the current regulatory system is that it was not designed to support the sharing of information across institutions. It was designed to regulate individual institutions, and as the Fed, and other regulatory agencies, start to think about how to compare information across institutions, we can expect to see them demanding a great degree of standardization in term of how data about risk in the business is collected, managed and shared.