Paulson Unveils US Capital Markets Action Plan

by Mike Godfrey, Tax-News.com, Washington

29 June 2007

US Treasury Secretary Henry Paulson, has announced the next stages of his capital markets competitiveness action plan, which focuses on maintaining the global leadership of America's capital markets.

The plan follows the Treasury's first set of capital markets initiatives, announced in May, to strengthen financial reporting and seek a more sustainable and transparent auditing profession.

"To maintain our capital markets' leadership, we need a modern regulatory structure complemented by market leaders embracing best practices," Paulson stated. "The steps we are announcing today will help to strengthen our global competitiveness."

The second stage of the capital markets competitiveness plan seeks a rationalized regulatory structure with improved oversight, increased efficiency, reduced overlap, and the ability to adapt to market participants' constantly-changing strategies and tools. The plan will suggest improvements for all financial market participants, including the Treasury Department itself.

Experts at the Treasury's March Conference on US Capital Markets Competitiveness noted that the right regulatory balance would combine high standards of market integrity, stability and investor protection with a strong foundation for innovation, growth, and competitiveness.

The next steps of the plan will include:

Pursuing a Modernized Regulatory Structure. The Treasury Department is examining the structure of the regulatory system for all financial services providers and will release its blueprint for reforms by early next year.

Encourage Development and Adoption of Industry Best Practices for Asset Managers and Investors in Hedge Funds. The President's Working Group on Financial Markets will work with asset managers and investors to help these two groups define separate sets of best practices that address investor protection, enhance market discipline and mitigate systemic risk. This effort, based on the PWG principles and guidelines released earlier this year, will complement the ongoing reviews of counterparties' and creditors' practices by supervisors globally.

Modernize Treasury's Cash Management and Debt Management. The Department will strengthen the US Government's cash and debt management systems through a broad series of public initiatives in the coming year, further improving the efficiency, integrity, transparency and competitiveness of the US Treasury market.

Complete Basel II Rulemaking. Treasury will work with US regulators to move the Basel II capital requirements forward. These new rules will reduce uncertainty, relieve burdens for both domestic and foreign banks, and enhance the United States' competitive position.

Empower All Investors through Financial Education. Any effort to improve the oversight of the financial services industry to protect investors must be coupled with empowering investors to better understand their options and decisions. Treasury will lead the President's inter-agency public initiative to help all Americans better understand money and personal finance. By encouraging saving and better access to financial services, Treasury can help broaden America's investor class.

Encourage International Investment Opportunities with Recognition of Comparable Regulatory Regimes. Mutual recognition between countries with regulatory schemes comparable to the United States could increase international investment opportunities and enhance risk diversification while preserving investor protection. Treasury supports SEC consideration of mutual recognition for foreign broker-dealers and foreign stock exchanges offering services to US investors.

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