A group led by Paul Volcker, an adviser to President-elect Barack Obama, called for a regulatory crackdown that would curtail risk-taking by systemically important financial institutions and limit their share of deposits, Bloomberg reported.
The panel of former central bankers, finance ministers and academics known as the Group of Thirty advised that regulators impose capital limits on proprietary trading and bar large banks from running hedge funds and private-equity firms that mix their own and their clients' money. In a report released today, the group also urged governments worldwide to tighten supervision of insurance companies, investment banks and large broker-dealers.
The recommendations come as U.S. lawmakers and the incoming Obama administration consider ways to overhaul regulation after major financial institutions reported almost $1 trillion in losses and writedowns stemming from the credit crisis.
Volcker, former chairman of the Federal Reserve, said at a press conference in New York that he'll make the recommendations to Obama, adding that the report is "a reasonable indication of the direction in which we might go." He was named by Obama to lead a panel of advisers on how to pull the U.S. out of the recession.
The financial system has "failed the test of the marketplace," said Volcker, 81, chairman of the Trustees of the G-30. He endorsed the recommendations as an individual and not as a representative of the incoming Obama administration, the statement said.
Volcker characterized the banking system using "a four- letter word: It's a mess."