A new report from Aite Group LLC explores possible regulatory and legislative responses to the current financial crisis, with particular attention paid to three key topics: consumer lending, risk management and deposit relationships.
 
Looking at commentary from regulators, proposed and recently enacted legislation, coupled with the context of the current political season, Aite Group predicts likely responses in these three areas.
 
Whereas just months ago concerns about economic conditions were theoretical and abstract, they are now practical and concrete. Regulators on all levels are scrambling to identify problems, plug holes, and define their roles as defenders of the public good. There is little doubt that regulators and lawmakers are poised to act.
 
Aite Group suggests that three central themes will guide the regulatory and legislative response over the coming years:
Regulators will step forward with stronger controls designed to measure and manage the risks carried by institutions
Operational controls imposed on institutions.
Institutions should expect regulators to shift the balance back toward the consumer, with efforts focused on providing more and better consumer protections.

“Congress is sympathetic to consumer pain, and well aware of consumer anger against the market participants and financial institutions that created these problems and the regulators who were supposed to be watching them,” said Eva Weber, an analyst with Aite Group and author of the new report.

“As a result, changes that seemed impossible six months ago are now fairly certain to occur in the next 12 to 24 months. For once, consumers, regulators and institutions all seem to agree that there is shared blame for the current problems, and that it will be important to act with a combination of speed and caution. The only real question is how far the pendulum will swing toward consumers, but sweeping changes that favor consumers seem likely.”