New Landscape, New Challenges: Structural Change and Regulation in the U.S. Financial Sector

IMF Working Papers, August 1, 2007

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Explores ways to fine-tune U.S. oversight arrangements given the rapid evolution of the U.S. financial sector and attendant regulatory challenges.
Surveys the financial landscape by separating:
- a highly regulated, multi-business, and (in terms of relative asset holdings) shrinking “core”; and
- a lightly regulated, more specialized, and rapidly expanding “periphery”.
Explains the U.S. regulatory philosophy and structure, emphasizing:
- focus on core institutions; and
- jurisdictional complexity.
Highlights certain new challenges without presuming to have all the solutions.
Draws out broad policy implications from the “30,000 foot level”.
Concludes by tabling and discussing one specific reform idea.

Structural change in the U.S. financial sector has produced a contrast between a regulated core and an expanding periphery.
The regulatory framework is characterized by complexity of jurisdiction and an emphasis on core institutions.
New challenges arise from the evolving structure; the paper highlights these issues but does not claim comprehensive solutions.
Broad policy implications are identified at a high, systemwide level (“30,000 foot level”).
The paper culminates in the presentation and discussion of one concrete reform proposal.