Big Bank Regulators Propose New Supervision Model

International banking regulators issued a new set of principles calling for a “college of supervisors” to oversee the global banking business, according to The New York Times’ Dealbook. The idea, explains University of Pennsylvania professor David Zaring, is to create a team of regulators for globally important banks that would share information fluidly enough to make the supervision of these institutions on a country-by-country basis manageable.

A “home” supervisor, or the supervisor in the country in which the bank is based, would lead the college, and would collaborate with those countries in which the bank has branches. In order to prevent a large-scale economic crisis similar to the one seen in 2008, the college would include a “crisis management group.”

However, Zaring points out that the idea of a college of supervisors for big banks is unlikely to “graduate” to fruition for a number of reasons. First, a college of supervisors is designed to be as ivory-tower in name as it is in practice; the main objective is communication, not taking action to fix a problem. Specifically, when it comes to financial crises, the college of supervisors is an untested and unproven solution to banking troubles. And stateside, big banks and creditors are already experiencing growing oversight from the Consumer Financial Protection Bureau, which was born largely out of big bank problems in the first place.

In the end, large banks and creditors in the U.S. are still going to look to the CFPB as its own “home” supervisor. This has created an especially important tie to the debt industry ever since the CFPB released its bulletin indicating that first party creditors will be held to the same compliance standards as collection agencies and “service providers,” particularly when it comes to Unfair Deceptive or Abusive Acts and Practices (UDAAP).

Could this kind of regulatory collaboration work in the debt collection sphere? What would it look like? Let us know what you think of the proposal in the comments.