FINRA, the Financial Industry Regulatory Authority, is tightening its oversight of Wall Street’s top three banks, including JPMorgan Chase & Co., Wells Fargo & Co. and Citigroup Inc., to try to prevent them from becoming too big to fail.
The agency’s final rules for the firms are due out next week.
With regulators focused on the banks’ ability to meet the conditions under which they can fail, they are grappling with how to manage an industry that has become so complex, so sprawling and so dangerous, that regulators and regulators-in-waiting are often forced to put their own careers at risk to do their jobs.
The rulemaking is a sign of the pressure facing regulators who have been struggling to contain the cost and complexity of the industry.
A bank, for instance, that fails is subject to penalties of up to $50 billion, while a bank that fails multiple times, which are known as “fails on multiple fronts,” is subject for up to a year to fines ranging from $250 billion to $500 billion.
As the industry has become more complex, regulators have tried to come up with better ways to manage risk, which they say is part of their mission.
For example, the agency created a regulatory framework that makes it easier for banks to be regulated and helps them more effectively manage their own risk.
The agency also set up new financial institutions that provide better supervision to make sure that firms are complying with the rules.
Yet many regulators still worry that banks are too big.
They worry that regulators will have too much power and are not able to use that power judiciously.
The regulator agency that has taken the lead in managing the industry, the Federal Reserve, has also faced criticism from critics who say it has failed to enforce the rules adequately and has been slow to enforce them effectively.
To try to address that, the FERC is taking steps to crack down on the behavior of some of the biggest players in the financial sector.
On Wednesday, the regulator will begin rolling out new guidelines that will make it easier to penalize large banks and credit card companies that fail to meet rules or do not comply with the new rules.
The new guidelines will apply to firms that fail or fail multiple times and for companies that do not have a bank.
In addition, the new regulations will make clearer how much money a company must pay a regulator for a specific action, such as failing to meet certain conditions or not providing a certain level of customer service.
The FERC has set a deadline of January 1 for firms to comply or risk losing their bank status, and it has until May 30 to do so.
On Thursday, the New York Fed released a detailed plan to help companies comply with regulators’ new guidance.
It outlines several steps banks can take to improve their compliance with the guidance.
The plan also will give regulators more leeway to enforce certain rules on the financial industry, including rules that would prevent banks from making risky trades and make it harder for firms that are too large to fail to fail and to avoid a bankruptcy.
The Federal Reserve also is considering changes to how it regulates certain banks.
The bank said it is considering whether to regulate some of those banks, too.
This story is based on wire services interviews with participants in the industry and the views of the participants.
The Associated Press also provided reporting by Kaveh Bajwa.