MSRB Adopts Policy for Integrating Economic Analysis into Rulemaking Process

The MSRB adopted a policy for the formal use of economic analysis in MSRB rulemaking which is intended to ensure that regulations support a fair and efficient municipal market, as well as balance the benefits of protections for investors and municipal issuers with the burdens placed on regulated entities. The policy incorporates the core principles of the SEC guidance on economic analysis, which include:

  • identifying the need for a proposed rule;
  • evaluating alternative regulatory approaches; and
  • assessing the benefits and costs, both quantitative and qualitative.

Lofchie Comment: The SEC (and related SROs), on the one hand, and the CFTC, on the other, appear to be moving in opposite directions on cost-benefit analysis, with the SEC apparently embracing the requirement and the CFTC resisting it in court. Leaving aside the question of which agency is on the right side of the issue generally (and, obviously, I favor the acceptance of cost-benefit analysis), this complete split between the commissions is a further demonstration of the absence of any logic to the structure of our financial regulatory system, where two commissions regulating many overlapping matters take such divergent approaches to the rulemaking process.

See: MSRB Policy on the Use of Economic Analysis in MSRB Rulemaking; MSRB Press Release.

Federal Reserve Paper: Capital Planning at Large Bank Holding Companies: Supervisory Expectations and the Range of Current Practice

The Board of Governors of the Federal Reserve System issued a paper evaluating the capital planning process at large bank holding companies. The agency found that while the process has improved, more work needs to be done to enhance practices for assessing the capital necessary to withstand stressful economic and financial conditions. The paper noted various aspects that need the most improvement, including: accounting risks for specific business activities, methods of projecting the effect of certain stresses on capital needs, and governance of the capital-planning process.

See: Capital Planning at Large Bank Holding Companies.
See also: Federal Reserve Press Release.