Fed Governor Examines Post-Crisis Financial Regulation

Governor Daniel K. Tarullo of the Board of Governors of the Federal Reserve System described a "shift of perspective" in regulation since the financial crisis. In a speech on the "New Pedagogy of Financial Regulation" at Columbia Law School, he examined the transition from banking regulation to financial regulation and its effects on policy and scholarship.

Governor Tarullo identified two gaps highlighted by the crisis. These included "the inadequate prudential regulation of the most systemically important financial institutions ('SIFIs') and the sometimes nonexistent prudential regulation of the many activities now denominated as 'shadow banking.'" He opined further that as regulatory stringency is strengthened for larger banking organizations, a less demanding regime is needed "for smaller institutions whose contribution to systemic contagion would almost surely be somewhere between modest and inconsequential."