Regulators facing challenge in defining systemic risk

One of the primary goals of the Dodd-Frank financial reform legislation was to establish a structure that would enable regulators to more effectively predict the next financial crisis. The Office of Financial Research was created as a result, but officials are finding the biggest obstacle has been to define what qualifies an institution as a “systemic risk.”

Wells Fargo Bank vice president David Newman told American Banker that what is needed is a process to enable regulators and the private sector to define specific standards.

“Unless we find a way to standardize the data in order to effectively understand it so that we have consistent data, so that the data can be defined precisely with clarity, so that we have trust in the data,” said Newman.

Read more about the Office of Financial Research.