For example, as we mentioned above, holding companies may have subsidiary holding companies that have their own banking or nonbanking subsidiaries. Our objectives were to (1) discuss previously reported problems with the bank oversight structure in the United States, (2) summarize those characteristics of the five countries’ regulatory structures that might be useful for Congress to consider in any U.S. modernization efforts, and (3) identify potential avenues for modernizing the U.S. banking oversight structure. Other examiners from the same agency focus on consumer protection and community reinvestment performance of banking institutions. In all five countries we studied, banking organizations typically were subject to consolidated oversight, with one oversight entity being legally responsible and accountable for the entire banking organization, including its banking and nonbanking subsidiaries. In France, Germany, and Japan the central bank was one of two principal oversight agencies, but the countries had different structures for involving the central banks in bank oversight. We believe that the federal bank oversight structure should include: (1) clearly defined responsibility for consolidated and comprehensive oversight of entire banking organizations, with coordinated functional regulation and supervision of individual components; (2) independence from undue political pressure, balanced by appropriate accountability and adequate congressional oversight; (3) consistent rules, consistently applied for similar activities; and (4) enhanced efficiency and reduced regulatory burden, consistent with maintaining safety and soundness. In five recent reports, we reviewed the structure and operations of bank regulation and supervision activities in Canada, France, Germany, Japan, and the U.K. Each of the oversight structures of these five countries reflects a unique history, culture, and banking industry, and, as a result, no two of the five oversight structures are identical. Nevertheless, certain aspects of these structures may be useful to consider in future efforts to modernize banking oversight in the United States, even though no structure as a whole likely would be appropriate to adopt in the United States. Some countries relied on the work of external auditors, at least in part, for purposes of efficiency. Recommendations

GAO’s work on the five foreign oversight systems showed that there are a number of different ways to simplify bank oversight in the United States in accordance with the four principles of consolidated oversight, independence, consistency, and enhanced efficiency and reduced burden.
Why GAO Did This Study

Pursuant to a congressional request, GAO reviewed its previous work on the structure and operations of bank oversight in five countries, focusing on: (1) aspects of those systems that may be useful for Congress to consider in any future modernization efforts; (2) perceived problems with federal bank oversight in the United States; and (3) principles for modernizing the U.S. federal bank oversight structure.

What GAO Found

GAO found that: (1) the five foreign banking systems reviewed had less complex and more streamlined oversight structures than the United States; (2) in all five countries, fewer national agencies were involved with bank regulation and supervision than in the United States; (3) in all but one of these countries, both the central bank and the ministry of finance had some role in bank oversight, and several of these countries relied on the work of the banks' external auditors to perform certain oversight functions; (4) in all cases, there was one entity that was clearly responsible and accountable for consolidated oversight of banking organizations as a whole; (5) the bank oversight structure in the United States is relatively complex, with four different federal agencies having the same basic oversight responsibilities for those banks under their respective purview; (6) industry representatives and expert observers have contended that multiple examinations and reporting requirements resulting from the shared oversight responsibilities of four different regulators contribute to banks' regulatory burden, and that the federal oversight structure is inherently inefficient; (7) having one agency responsible for examining all U.S. bank holding companies, with a different agency or agencies responsible for examining the holding companies' principal banks, could result in overlap and a lack of clear responsibility and accountability for consolidated oversight of U.S. banking operations; and (8) any modernized banking structure should provide for clearly defined responsibility and accountability for consolidated and comprehensive oversight, independence from undue political pressure, consistent rules, consistently applied for similar activities, and enhanced efficiency and reduced regulatory burden.