WASHINGTON - Securities and Exchange Commission chairman Mary Schapiro said Friday that she favors the creation of a council of existing regulators to oversee risk in the financial markets, rather than granting that authority to a single regulator.
Speaking at the Investment Company Institute's annual membership meeting here, Schapiro said she is "inclined toward" the regulatory reform structure floated earlier in the week by Federal Deposit Insurance Corp. chairman Sheila Bair.
"Given the various components of effective financial regulation, I have long been concerned about effective concentration of power, which really means effective concentration of point of view in a single regulator," Schapiro said.
Some lawmakers have argued for a single entity, possibly the Federal Reserve, to monitor risk in the financial system. But Senate Banking Committee chairman Christopher Dodd, D-Conn., speaking at the Wednesday hearing during which Bair broached the idea, said that he too favors a council to monitor systemic risk.
Under Bair's proposal, the council would be comprised of representatives from the Fed, FDIC, the Office of Comptroller of the Currency and the SEC.
At a micro level, it would be responsible for identifying institutions, practices and markets that create systemic risks, and writing rules or setting standards to address those risks.
It also would have the authority to overrule or force actions on behalf of other regulatory entities, and would be able to demand information from systemically important entities and to readily share the information among its members, Bair told Banking Committee members Wednesday.
Bair also called for the establishment of two additional risk-related regulators: one exclusively for systemically important firms, and an entity to unwind failed financial institutions. In her remarks Friday, Schapiro endorsed both of these proposed entities, which she stressed should remain independent of each other.
Schapiro also defended the role of the SEC as an independent capital markets regulator charged with investor protection and the formation of fair and efficient markets. Splitting up the commission into multiple pieces would be a "disaster," she said, adding that banking and market regulators should remain separate.
"Any system of regulation must take as its touchstone the protection of individual well-being," Schapiro said. "At the SEC, as you know, we call that investor protection. Though we are not, as some would have you believe, focused solely or even primarily on retail transactions, and we regulate institutions and markets, our focus has been and must remain on how our actions benefit the workers, savers and investors of the United States."
Turning to the SEC's top internal priorities, Schapiro said that the agency is entering "the most active rulemaking period" in its 75-year history. Among other possible rule changes, the commission will consider reforms to money market mutual funds, so-called target-date funds, 12b-1 fees and credit rating agency rules, she said.
"All of that is just the beginning," Schapiro said. "There is so much urgent work to do."