GAO: Federal Financial Regulatory System Remains ‘High Risk’

A report from the Government Accountability Office has found that the federal financial regulatory system remains ‘high risk’. Learn why.

David Baumann


Apr 24



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David Baumann

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David Baumann

A squiggly pink arrow pointing downward and to the right.

Report highlights “fragmentation and overlap” in oversight of financial institutions, suggests Congress consider changes to regulatory structure.

The federal financial regulatory system is still inefficient, with multiple agencies having overlapping authority, resulting in inconsistent enforcement of laws, the Government Accountability Office said in its latest list of “High Risk” programs.

“The U.S. financial regulatory structure remains complex,” the report found. “Responsibilities are fragmented among a number of regulators with overlapping authorities. For example, multiple forms of overlap exist among the regulators who perform safety and soundness oversight of depository institutions.”

However, the report does not go as far as a 2016 GAO report on the subject, which said that Congress should consider consolidating federal financial regulators.

Inside the Report

Each new Congress, GAO issues a list of programs that pose the highest risks to the federal government. Those risks range from fraud to inefficiency.

This year’s 248-page report contains myriad federal programs, including the National Flood Insurance Program and pandemic-related small business lending programs.

When it comes to the federal financial regulatory system, the GAO said, “The current structure continues to introduce significant challenges for efficient and effective oversight of financial institutions and activities.”

The agency cited the failures of Silicon Valley Bank and Signature Bank as posing challenges that should be addressed by regulators.

The GAO said that Congress should consider changes to the regulatory structure to reduce “fragmentation and overlap” in oversight. By addressing those issues, according to the report, Congress could improve the efficiency of oversight, and make consumer protection efforts and supervision of institutions more consistent.

Backstory and NCUA Involvement

The federal financial regulatory system has been listed as “high risk” in previous GAO reports. For instance, the agency noted that similar criticisms were leveled in February 2016.

That 2016 report, which contained a recommendation of possible consolidation of agencies, drew a strong rebuke from then-NCUA Executive Director Mark Treichel.

Treichel said that the NCUA could find “no compelling evidence throughout the document that would lend additional support to the idea” of consolidation.

Other Programs Cited

In addition to the federal financial programs, the GAO said that the Small Business Administration has not fully implemented its fraud risk management efforts to oversee pandemic-related programs, including the Paycheck Protection Program.

And once again, the agency noted that Congress has failed to reauthorize the National Flood Insurance Program.

“Congress should consider comprehensive reform of the National Flood Insurance Program (NFIP) to improve the program’s solvency and the nation’s flood resilience,” the report stated. The GAO noted that, as of September 2022, the Federal Emergency Management Agency owed the federal treasury $20.5 billion despite Congress having canceled $16 billion in debt in October 2017.

“Without reforms, NFIP’s financial condition will likely continue to worsen,” the report concluded.

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