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MFDF - Mutual Fund Directors Forum - Proposed Regulation Targets Sections of Gramm-Leach-Blilely; Global Organization Urges Restraint on Regulatory Rollbacks

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Proposed Regulation Targets Sections of Gramm-Leach-Blilely; Global Organization Urges Restraint on Regulatory Rollbacks

A bill introduced in Congress by Democratic Congresswoman Marcy Kaptur aims to “revive the separation between commercial banking and the securities business, in the manner provided” by the Glass-Steagall act, among other objectives. The bill proposes to repeal provisions of the Gramm-Leach-Bliley Act that permit financial holding companies to engage in a wide range of financial activities, including certain securities, insurance and underwriting activities, and to reimpose Glass-Steagall Act restrictions on affiliations between insured depository institutions and entities engaged in certain securities activities -- including a prohibition on officers, directors, and employees of securities firms serving on boards of depository institutions.  A similar bill was proposed by Senators Elizabeth Warren and John McCain in 2015

Meanwhile, the Wall Street Journal reported that the Systemic Risk Council, a global group comprising former financial regulators and academics, issued a statement warning against financial deregulation and arguing that financial institutions remain at heightened risk of financial losses during an economic downturn. In a statement, the Systemic Risk Council argued that post-crisis financial reforms remain vital and should continue. The Council noted that debt levels in the world economy have continued to increase since the financial crises and that central banks and fiscal authorities “will not have nearly as much firepower as they were able to deploy in 2009 and maintain” should another downturn occur.  “Far from being a moment to relax any of the five pillars of reform, therefore, it may be prudent to adopt tougher policies while the macroeconomic arsenal is replenished and as debt levels are reduced,” the Council said in its statement.