GAO discussed the modernization of the financial services regulatory system. GAO noted that: (1) although the banking industry appears to have recovered from its recent crisis, it is premature to assume that fundamental concerns about risk management and regulatory supervision have been resolved; (2) while the regulatory system has adapted to the financial industry's movements on an ad hoc basis, the regulatory structure has overlaps, anomalies, and gaps; (3) new safeguards could be implemented to prevent undue risks to various interests in the financial system; (4) financial services holding companies should be subject to comprehensive regulation on a functional and consolidated basis to prevent potential conflicts of interest and protect insured deposits; (5) capital standards for insured banks and financial services holding companies should adequately reflect all risks and regulators should conduct periodic assessments of their risk management systems; (6) regulators should have clear rulemaking and supervisory authority and be required to cooperate and coordinate with each other; and (7) mechanisms should exist to prevent excessive concentration of economic power and to ensure free entry into financial services markets.