WASHINGTON — The Trump administration is prepping recommendations to address shortcomings in the capital markets in a report to be released next month, a top Treasury Department official said Monday.

Craig Phillips, who serves as counselor to Treasury Secretary Steven Mnuchin, said fixes will focus on "access to equity capital" and making U.S. markets competitive for private and public companies.

The report will also address "equity and fixed-income market structure, and make recommendations that we believe will enhance market liquidity and efficiency," Phillips said during a conference here.

Steven Mnuchin, U.S. Treasury secretary, listens to a question during a White House press briefing in Washington.
A top aide to Treasury Secretary Steven Mnuchin said an October report will make recommendations on fixes to "enhance market liquidity and efficiency." Bloomberg News

Additionally, the report will comment on "how to best promote U.S. interests, with thoughtful engagement with standards-setting bodies to ensure a level playing field.” Finally, Phillips said the report will lay out some suggestions on “how to properly calibrate the regulations of the derivatives market and the roles of CCPs [central counterparty clearinghouses] to promote liquidity, safety, soundness and risk management.”

President Trump issued an executive order Feb. 3 directing the Treasury to make recommendations on how to retool the financial regulatory framework so that it conforms to a handful of “core principles,” including making regulations “efficient, effective and appropriately tailored.”

The Treasury issued the first such report in June, laying out the broad recommendations for regulatory changes, including a scaling back of various rules as they apply to community banks; expanding the role of the Financial Stability Oversight Council; more clearly delineating agency responsibilities; and maintaining U.S. participation in international standards-setting forums, including the Basel Committee on Banking Supervision.

Phillips noted that one of the top priorities for the administration is to ensure that such international standards ensure a level regulatory playing field across international jurisdictions. But he also said it is important that regulators within the U.S. have a better-coordinated vision of how rules are meant to function.

“It’s fair to say that harmonization and appropriate tailoring of regulatory regimes and issues is of critical importance,” Phillips said. “In particular, improving the coordination and implementation of regulations between market regulators … and prudential regulators, including the Federal Reserve, OCC and FDIC, is of critical importance.”

Phillips also touched on another of the president’s executive orders, one that examines the utility of the Federal Deposit Insurance Corp.’s Orderly Liquidation Authority — a Dodd-Frank Act innovation that would give the agency the power to compel a swift resolution of a failing financial institution. Phillips noted that the statute suggests that OLA should only be used in a dire emergency and when no other recourse, such as bankruptcy, would be available.

“A core principle in Dodd-Frank Title II is to avoid the use of OLA, implementing it only in the most exigent circumstances, when the financial stability of the system is at risk due to the demise of one of more financial institutions,” Phillips said. “If we are to accomplish this goal, it is really timely for us to identify improvements to the bankruptcy code to better resolve a financial institution in bankruptcy, avoiding the implementation of OLA.”

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