Bank Supervision and Disclosure

On Bloomberg, we read the following:

Former U.S. bank regulators warned that lenders and supervisors may share less information with each other in day-to-day dealings after lawmakers released dozens of confidential Federal Reserve e-mails.

“The regulatory process could be chilled or stifled because of a reluctance to speak candidly,” said Robert Clarke, a former comptroller of the currency and now a senior partner at Bracewell & Giuliani LLP in Houston. At a minimum, supervisors may communicate less via e-mail, said Oliver Ireland, an ex-Fed attorney now at Morrison & Foerster LLP in Washington.

No, I disagree. This coming from a former comptroller of the currency shows exactly where the problem with regulators was and still is.
According to these remarks we have to assume that supervision of financial institutions works on a ‘would-you-mind-sharing-information-with-us’ basis. If the banks say, uhm, yes we’d mind, regulators would just answer with ‘ok, have a nice day then’ and forget about it. The current mess comes as no surprise, then.

The requirements can be written into law making it a legal requirement for a financial institution to deliver any information requested by the regulator. Since these requirements will be the same for everyone, there really is no competetive disadvantage to disclosing the information.

Notwithstanding the fact, that important stuff is mostly not discussed in e-mails anyway, regulators are required as a matter of law to keep a paper trail for their decision processes and the decissions they made. And, if I am not mistaken, so are financial institutions, because of Sarbanes-Oxley.

It seems what they are telling us is that they can’t bank if they have to follow any law. Then it would be time to close them down.
You want to bank, you comply with regulations we give you. Period.