LISTEN: Ross Professor Explains The Dangers of Recent Regulatory Changes

Michigan Ross Professor Jeremy Kress has been warning about a shift by the Financial Stability Oversight Council in its approach to regulating non-bank financial institutions.

In the past, the council has identified systemically risky companies for regulation. But lately it has been moving to focus on specific financial activities instead of individual institutions. Kress argues this is a mistake, potentially risking a new financial crisis.

Kress shares his thoughts in a new episode of Bankshot, the podcast from American Banker magazine. The episode takes a closer look at the FSOC and its regulatory practices.

“Even if you could identify and regulate specific financial activities in isolation, I don’t think that’s enough to prevent firms like Lehman Brothers and Bear Stearns from failing, because it ignores the way that all of those activities can interact within a single firm,” Kress says on the podcast. In addition, Kress cautions against an activities-based approach because “FSOC’s activities-based authority is really quite weak.”

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Ross media contact: Bridget Vis, public relations specialist,  visb@umich.edu

Jeremy Kress is an assistant professor of business law at the University of Michigan Ross School of Business.