U.S.: Senate approves financial reform The United States Senate approved on Thursday by 60 votes to favor and 39 against an ambitious reform of the U.S. financial system, leaving the text of 2,300 pages ready to be signed next week President Barack Obama.
The complex reform, which will be realized three years after the start of the financial crisis, set limits on the activity of banks and offers more protection to consumers, hoping to avoid a new crisis the financial system triggered in 2008.
The Senate vote ends more than a year of parliamentary debate began when President Barack Obama proposed the reform in June 2009. The Chamber of Representatives approved it last month. International Treaty
The rule creates a regulatory body to oversee the overall risks to the financial system and the big banks will have to increase their reserve funds to ensure they have liquidity in times of crisis.
also requires the reform of rating agencies and tries to shed more transparency in the derivatives market, used by some of the perpetrators of financial collapse.
The U.S. Treasury secretary, Timothy Geithner, said after learning of the approval, the reform contributes to a growing international consensus on the need to tighten the rules governing the banking business.
"Then our goal," Geithner said, "is to negotiate an international treaty requiring large banks to allocate more reserves, a much bigger financial cushion to absorb losses."
What will change with this law?
reform obligations creates hundreds of rating agencies, banks and investment funds at risk.
consumer protection agency
The law creates a special office to handle relations between the bank and its client, which will act as an advocate for the public. That agency is responsible for ensuring that compliance with the wish of President Obama that loan and credit cards are written in a "language that everyone can understand" and assist those who have been victims of unscrupulous lenders. Also monitor the banks do not charge high rates to business transactions made by credit card.
agencies may not grant mortgage loans or loans that recipients can not pay and are prevented from increasing interest rates to customers who have qualified for lower levels. Consumers will also be protected from high penalties for loans or for early payment.
derivatives markets
One of the main aspects of the law is forcing financial institutions to report all transactions made in the derivatives market. Transactions are estimated at U.S. $ 600 billion per year currently unsupervised and where the problems started that generated the crisis of 2007-08. This market will now fall under the supervision of regulatory authorities, which will detect problems before they affect the health of the economy. Institutions participating in this market should ensure that their funds cover the operations they perform.
No more bailouts
The federal government will now have the authority to intervene and eventually liquidate banks and other institutions to confront problems, rather than assist them with public funds as had been done before crisis of 2008.
addition, the emergency loan program of the Federal Reserve, equivalent to the Central Bank will be audited to determine the destination of the funds used to prop financial institutions affected by the crisis.
credit rating agencies
Offices which are responsible for assessing the credit may not benefit financially from their support investments that are considered high risk and should respond if these are unsuccessful.
New controls these agencies will be accountable for the reliability of their reports, if the investments they have recommended not prove advantageous or reliable as they may have said that they were, to the point that investors can bring claims legal companies who have submitted information makeup or hidden details on programs considered risky.
(Source BBC)