Institute Testifies on Financial Services Modernization

Washington, DC, February 10, 1999 - In testimony today before the House Banking Committee on H.R. 10, the "Financial Services Act of 1999," Institute President Matthew P. Fink expressed the fund industry's support for the legislation. The hearing was the first of three held by Committee Chairman James Leach (R-IA) to review the bill. H.R. 10 would:

In expressing its support for the legislation, the Institute suggested that the committee consider three changes. These changes pertain to: (1) clarifying the appropriate role of the bank regulatory agencies; (2) allowing a limited degree of commercial activities for diversified financial services organizations; and (3) changing the grandfather date for unitary savings and loan holding companies.

The most important of these changes is to ensure that the principle of functional regulation applies to all of the bank regulatory agencies. Clearly defined functional regulation reduces overlap among regulators and, more importantly, avoids regulatory concepts designed for one type of financial institution being applied to different types of institutions for which they are inappropriate. To ensure that the bill's goal of functional regulation is met, the Institute recommended that the standards for functional regulation laid out in the bill for the Federal Reserve Board and the FDIC should also apply to the Comptroller of the Currency and the Office of Thrift Supervision.