financial firms may not meet the international requirement for consolidated supervision unless Congress creates an umbrella regulator, Federal Reserve Board Governor Susan M. Phillips warned Wednesday.
"Comprehensive consolidated supervision by the home country supervisor is a legal requirement for foreign banks operating in the U.S.," Ms. Phillips told the Exchequer Club. "Some foreign supervisors are now beginning to question the consolidated supervision of U.S. firms operating in their countries."
Ms. Phillips declined to elaborate on what concerns foreign regulators have with U.S. supervision. But her comments came as the House Banking Committee was considering a financial modernization bill that would make the Fed the umbrella regulator of all financial services companies.
An umbrella regulator would not necessarily send examiners to the parent company, she said. Rather, it could analyze public financial statements, credit ratings, reports by Wall Street analysts, internal management reports, and audit findings. The regulator would ensure the company was managing all its risks and did not pose a threat to its bank subsidiary, she said.
The umbrella regulator, however, must have the full range of enforcement powers, including the authority to order the parent company to sell its bank, she said.