Skip to Highlights
Highlights

Pursuant to a congressional request, GAO reviewed federal bank regulators' oversight of banks' securities activities, focusing on the: (1) extent to which banks provide securities brokerage services; (2) how those services are regulated; (3) results of Federal Reserve inspections of bank holding company subsidiaries authorized to underwrite and deal in securities; and (4) Federal Deposit Insurance Corporation's (FDIC) regulation of bank subsidiaries that can underwrite and deal in securities.

Skip to Recommendations

Recommendations

Recommendations for Executive Action

Agency Affected Recommendation Status
Other The heads of the Federal Reserve, FDIC, the Office of the Comptroller of the Currency, SEC, and NASD should require their respective staffs to work together to develop and implement an approach for regulating bank-direct securities activities that provides consistent and effective standards for investor protection while ensuring bank safety and soundness.
Closed - Not Implemented
Banking and securities regulators are still working on a proposed agreement under which bank employees would take NASD and NYSE qualification examinations and would be listed in CRD. An agreement has been worked out among the regulators and a proposed rule has been drafted and public comments obtained. Regulators, however, have decided not to act any further to approve the rule pending the outcome of H.R. 10, which would mandate broader financial system modernization.
Office of the Comptroller of the Currency The heads of the Federal Reserve, FDIC, the Office of the Comptroller of the Currency, SEC, and NASD should require their respective staffs to work together to develop and implement an approach for regulating bank-direct securities activities that provides consistent and effective standards for investor protection while ensuring bank safety and soundness.
Closed - Not Implemented
Banking and securities regulators are still working on a proposed agreement under which bank employees would take NASD and NYSE qualification examinations and would be listed in CRD. An agreement has been worked out among the regulators and a proposed rule has been drafted and public comments obtained. Regulators, however, have decided not to act any further to approve the rule pending the outcome of H.R. 10, which would mandate broader financial system modernization.
Federal Deposit Insurance Corporation The heads of the Federal Reserve, FDIC, the Office of the Comptroller of the Currency, SEC, and NASD should require their respective staffs to work together to develop and implement an approach for regulating bank-direct securities activities that provides consistent and effective standards for investor protection while ensuring bank safety and soundness.
Closed - Not Implemented
Banking and securities regulators are still working on a proposed agreement under which bank employees would take NASD and NYSE qualification examinations and would be listed in CRD. An agreement has been worked out among the regulators and a proposed rule has been drafted and public comments obtained. Regulators, however, have decided not to act any further to approve the rule pending the outcome of H.R. 10, which would mandate broader financial system modernization.
Federal Reserve System The heads of the Federal Reserve, FDIC, the Office of the Comptroller of the Currency, SEC, and NASD should require their respective staffs to work together to develop and implement an approach for regulating bank-direct securities activities that provides consistent and effective standards for investor protection while ensuring bank safety and soundness.
Closed - Not Implemented
Banking and securities regulators are still working on a proposed agreement under which bank employees would take NASD and NYSE qualification examinations and would be listed in the Central Registration Depository (CRD). An agreement has been worked out among the regulators and a proposed rule has been drafted and public comments obtained. Regulators, however, have decided not to act any further to approve the rule pending the outcome of H.R. 10, which would mandate broader financial system modernization.
United States Securities and Exchange Commission The heads of the Federal Reserve, FDIC, the Office of the Comptroller of the Currency, SEC, and NASD should require their respective staffs to work together to develop and implement an approach for regulating bank-direct securities activities that provides consistent and effective standards for investor protection while ensuring bank safety and soundness.
Closed - Not Implemented
Banking and securities regulators are still working on a proposed agreement under which bank employees would take NASD and NYSE qualification examinations and would be listed in CRD. An agreement has been worked out among the regulators and a proposed rule has been drafted and public comments obtained. Regulators, however, have decided not to act any further to approve the rule pending the outcome of H.R. 10, which would mandate broader financial system modernization.
Board of Governors The Chairman of the Board of Governors of the Federal Reserve System should ensure that either Federal Reserve examiners or internal auditors review and test all applicable firewalls at least once annually and document in inspection workpapers the work performed by Federal Reserve examiners or bank holding company internal auditors. Federal Reserve workpapers should document Federal Reserve examiners' testing of the work of internal auditors as a basis for reliance on internal audit.
Closed - Implemented
A program was established.
Federal Deposit Insurance Corporation The Chairman, FDIC, should establish a program to identify and routinely review the securities activities and the financial condition and performance of bona fide subsidiaries under FDIC jurisdiction to assess the overall risks posed by the activities on federally insured banks and ensure compliance with firewalls. The program should provide FDIC examiners guidance and training on how to examine bank and bank subsidiary securities activities.
Closed - Implemented
A program was established.

Full Report