The Government Accountability Office has issued a report on the status of Dodd-Frank Act regulatory reforms. To assess these efforts, the GAO examined the overall status of financial regulatory reforms arising from the act, challenges affecting implementation and areas that pose continued risk. Overall, the GAO identified 236 provisions of the act requiring rulemakings across nine areas. According to the GAO, as of December 2012, regulators had issued final rules for about 48 percent of these provisions; however, the GAO found that in some cases the dates by which affected entities had to comply with the rules had yet to be reached. Of the remaining provisions, regulators had proposed rules for about 29 percent, and rulemakings had not occurred for about 23 percent.
A variety of challenges affected regulators' progress in implementing the act's reforms, according to the GAO. Regulators indicated that completing rules has taken time because of the number and complexity of the issues and because many rules are interconnected. Regulators told the GAO that implementing the Dodd-Frank reforms requires a great deal of coordination at the domestic and international levels. Although regulators have established mechanisms to facilitate coordination and believe coordination efforts have improved the quality of the rulemakings, several regulators indicated that coordination increased the amount of time needed to finalize rulemakings. The report notes that regulators have prioritized developing responsive, appropriate rules over meeting tight statutory deadlines. As a result, some important rules may take the longest to develop, the report states.
The GAO pointed out several areas where it determined risks remain:
- The efficiency of the regulatory system was not materially changed by the act. A large, fragmented regulatory structure with numerous regulators remains, according to the GAO, requiring regulators to coordinate actions and try to reconcile or balance differing approaches to ensure that regulated entities are subject to appropriate scrutiny.
- Concerns remain about Fannie Mae and Freddie Mac, which have operated under federal conservatorships since 2008 and, as of December 2012, have received $187 billion in federal assistance. Until their status is resolved, the GAO asserts that they continue to “represent financial exposures for the federal government, a risk to taxpayers, and an impediment to the transition to a housing market that functions effectively without the current level of substantial federal support.”
- The current structure of money market mutual funds may represent an unresolved risk, lacking capital buffers and other protections that could reduce the likelihood of destabilizing runs on their holdings, according to the report.
- Certain credit risk concentrations also pose potential systemic implications, such as the failure of one of the two institutions that provide credit to facilitate transactions in the tri-party repurchase market that provides short-term funding to many institutions.
The GAO made no new recommendations but has previously made over 25 recommendations to the federal financial regulators related to Dodd-Frank implementation.