Mr. Nason's speech followed observations delivered earlier this year by his colleague, Treasury Secretary Henry J. Paulson, regarding the global competitiveness of the US financial services industry.

Opening his speech, Mr. Nason touched briefly upon the strength of the American economy from a global perspective, and made the point that capital markets are no longer confined by geographical or national boundaries.

After reiterating several points previously made by Mr. Paulson regarding the future of America's economy and how the Treasury intends to tackle some of its larger concerns, Mr. Nason went on to address the issue of the financial services regualation.

"The recent stress in the financial markets demonstrates that economic systems can benefit from improved financial services regulation," he observed, going on to state: "Indeed, few regulated and non-regulated financial institutions have escaped the effects of market volatility over the past few months. It is in everyone's interest to have a more optimal framework for financial services regulation."

"Examination and reexamination of financial services regulation are essential to fulfilling the Treasury Department's mission to promote the conditions for prosperity and stability in the United States and to encourage prosperity and stability in the rest of the world," he continued, adding: "The globalization of the capital markets also prompts the need for analysis of the current regulatory structure in the United States. Companies now can raise capital across the world, seeking environments that provide adequate capital and liquidity at the best cost."

Going on to talk about the competitive nature of global markets, Mr. Nason explained that:

"Our working assumption is that in this new globalized marketplace, we are engaged in a race-to-the-top, to achieve the optimal regulatory structure for the financial services industry. The optimal regulatory structure needs to attract capital based on its effectiveness in promoting innovation, managing system-wide risks, and fostering consumer and investor confidence."

"I believe that the race-to-the top is occurring at both a macro- and a micro-level. At the macro-level, we are witnessing the evolution and testing of various regulatory structures for the financial services sector," he continued.

Nason held up changes made by the United Kingdom as an example of those that should be considered by the US authorities, announcing that:

"For example, as you well know, the United Kingdom closely analyzed its regulatory structure just over a decade ago and made seminal changes such as separating bank supervision and monetary policy and consolidating financial services supervision under the umbrella of a single regulator."

He continued: "There are other macro-level models such as the "Twin Peaks" model adopted in Australia. This regulatory structure creates two distinct regulatory bodies – one responsible for prudential regulation of entities of such consequence that require prudential regulation and one responsible for market and disclosure regulation of financial products being offered to consumers and investors."

Looking to the situation in the United States, he observed that:

"Quite different from these two relatively new approaches, the US financial services regulatory structure has been largely knit together over the last 75 years. Much of this framework was put into place for particular reasons in a different time and in response to circumstances that no longer exist. We currently have five federal depository institution regulators, one federal securities regulator, one federal futures regulator and a state-based insurance regulatory system."

"We also have additional state based supervision of depositories and securities firms as well as self-regulatory organizations with broad regulatory powers. Our structure has evolved in order to meet the growing demands of our financial services industry, but this evolution has resulted largely in adding layers of regulation without an overall evaluation of the optimal way to regulate the financial services industry. "

Outlining the need for reform of the US financial regulatory system, Nason announced that:

"Our overarching goal is to craft recommendations that will result in a regulatory regime that most efficiently: safeguards the safety and stability of the financial system; maintains high standards of both consumer and investor protection; and promotes efficient and competitive capital markets."

"As part of this effort and in order to inform our work, the Treasury Department published a Federal Register notice seeking public comment on a series of questions about regulatory structure and received more than 350 comment letters in response. This level of participation in the Department's study highlights the importance and complexity of our task."

He concluded:

"First, in keeping with the theme I described earlier, we will propose some broad ideas for an optimal regulatory structure to match the globally-integrated US financial services industry. You should not be surprised to hear that this optimal structure will not match our current structure exactly. This will be a newly-designed model for the US financial services industry that should meet the needs of today and be flexible enough to address the issues that might come tomorrow. It will recognize the global nature of our capital markets, the greatly increased complexity of financial products, the importance of technology to the financial services sector, and the importance of consumer and investor protection in the provision of financial products."

"Of course, we recognize that there are many difficulties in obtaining wholesale changes to regulatory structure. There are many political and parochial concerns and some are hesitant and generally opposed to change. We recognize this fact. Therefore, our second category will consist of less conceptual recommendations that we believe will serve as intermediate steps to put us on the path towards the optimal structure of financial services regulation."

"Success of this initiative will not and should not be tied to short-term accomplishments. Today, I have identified the issues and segments where we will focus during this project. Some of the recommendations will be immediately relevant to legislative and regulatory policy issues. On these matters, our hope is that the Treasury Department's report will spur near-term tangible results. Implementation of other, longer-term recommendations will be subject to outside factors but will be ready should support for these reforms develop. Finally, our hope is that some of the recommendations will shape future debates regarding regulatory structure issues."