As promised in our initial assessment of the 2013 outlook (see Client Report 2013), we here turn to regulatory developments likely this year. As noted in Client Report 2013-2, we think Congress will largely continue its oversight role in Dodd-Frank, rather than enacting substantive changes to the law. While some statutory reforms are possible, including to the Lincoln “push-out” standards (see FSM Report DERIVATIVES23), we think the Hill will largely leave the coast clear for regulatory action. In this report, we focus principally on the FRB, as subsequent outlooks will address inter-agency and enforcement actions. The central bank is increasingly convinced that market incentives have unduly favored risky behavior at the biggest banks and that global efforts to craft cross-border rules are faltering. Some at the FRB call this new focus “Reg 2.0” and FedFin here assesses its key components.

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