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Financial Systems Reform and Modernization Act, 1742

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Financial Systems Reform and Modernization Act, 1742

Cortes Federales
Long title An Act to modernize the financial system of the Federation, provide for deregulation of certain financial activities, establish clear separation between commercial and investment banking operations, and for other purposes.
Number 1742-H-104
Introduced by Deputy Augusto Delgado, Deputy from Alduria, (FHP)
Extent Federation of Nouvelle Alexandrie
Other legislation
Related legislation Banking Act, 1726, Financial Regulation Act, 1719, Securities and Market Oversight Act, 1723


Key provisions

The Financial Systems Reform and Modernization Act, 1742 (the "Act") represents a landmark reform of Nouvelle Alexandrie's financial sector, balancing deregulatory measures with new structural safeguards. Key provisions include:

  • Separation of commercial and investment banking operations (Title I)
  • Elimination of geographic barriers for banking operations across regions (Title II)
  • Modernization of capital requirements for financial institutions (Title III)
  • Streamlining of regulatory oversight structures (Title IV)
  • Creation of the Financial Innovation Sandbox Program (Title V)
  • Strengthening of consumer protection measures (Title VI)
  • Establishment of the Systemic Risk Council (Title VII)

Legislative history

Status Date Tabled By Vote Outcome
Introduced in the Federal Assembly 15.II.1742 AN Deputy Augusto Delgado
Debated in the Federal Assembly
Passed in the Federal Assembly
Debated in the Chamber of Peers
Passed in the Chamber of Peers
Royal Assent

Text

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FINANCIAL SYSTEMS REFORM AND MODERNIZATION ACT, 1742

Ordered, by the Cortes Federales of Nouvelle Alexandrie,
to be Printed, 1742 AN.

_______________________________

BE IT ENACTED by the King's Most Excellent Majesty, by and with the advice and consent of the Cortes Federales, in this present 10th session assembled, and by the authority of the same, as follows:-

TITLE I
SEPARATION OF COMMERCIAL AND INVESTMENT BANKING

1. PROHIBITION AGAINST AFFILIATION.

  1. No banking entity that accepts deposits shall:
    1. Engage principally in issuing, underwriting, selling, or distributing stocks, bonds, debentures, notes, or other securities, except as hereinafter provided;
    2. Be affiliated with any corporation, association, business trust, or other similar organization engaged principally in the issue, underwriting, or distribution of securities;
    3. Hold ownership interest in any organization described in paragraph (2).

2. EXCEPTIONS AND LIMITATIONS.

  1. The prohibitions in Section 1 shall not apply to:
    1. Investment in government securities, including federal, regional, or municipal debt instruments;
    2. Investment in securities eligible for bank investment as determined by the Federal Securities & Investments Commission;
    3. The purchase and sale of securities solely upon the order and for the account of customers, with no risk assumed by the banking entity;
    4. Securities issued by small business investment companies.

3. TRANSITION PERIOD.

  1. Banking entities shall have a period of five (5) years from the effective date of this Act to:
    1. Divest ownership or control of any company which directly or indirectly engages in any activities prohibited under Section 1; or
    2. Cease activities prohibited under Section 1.
  2. The Federal Securities & Investments Commission may extend this period for up to two (2) additional years if:
    1. The extension would not be detrimental to the public interest;
    2. The banking entity has made good faith efforts to achieve compliance;
    3. The extension would not pose substantial risk to financial stability.

4. ESTABLISHMENT OF FIREWALLS.

  1. Banking entities that conduct permitted securities activities shall establish robust information barriers, including:
    1. Physical separation of banking and securities activities;
    2. Separate management and reporting structures;
    3. Distinct employee compensation systems;
    4. Controls to prevent exchange of material nonpublic information;
    5. Annual certification of compliance with these requirements.
TITLE II
ELIMINATION OF GEOGRAPHIC RESTRICTIONS

5. INTER-REGIONAL BANKING OPERATIONS.

  1. All restrictions on the ability of properly chartered banking institutions to establish branches or provide services across regional boundaries within the Federation are hereby eliminated.
  2. The consent of regional authorities shall not be required for a banking institution to:
    1. Open a branch in any Region;
    2. Merge with a banking institution headquartered in any Region;
    3. Acquire a banking institution headquartered in any Region.

6. EQUAL COMPETITIVE OPPORTUNITY.

  1. The Federal Securities & Investments Commission shall ensure that the removal of geographic restrictions does not result in anti-competitive concentrations of financial power.
  2. No single banking institution may control more than fifteen percent (15%) of the total deposits of the Federation without special approval from the Federal Securities & Investments Commission, which may only be granted after:
    1. Public hearings in each affected Region;
    2. Consultation with the Department of Justice's Antitrust Division;
    3. A finding that the concentration would not be contrary to the public interest.
TITLE III
MODERNIZATION OF CAPITAL REQUIREMENTS

7. RISK-BASED CAPITAL STANDARDS.

  1. The Federal Securities & Investments Commission shall develop risk-based capital standards that:
    1. More accurately reflect the actual risk profile of banking assets;
    2. Provide appropriate recognition of collateral and guarantees;
    3. Account for off-balance sheet exposures;
    4. Address concentration risks.
  2. The risk-based capital standards shall be designed to:
    1. Maintain the safety and soundness of the banking system;
    2. Minimize competitive inequities among banking organizations;
    3. Align regulatory capital requirements with actual economic risks.

8. REDUCED CAPITAL REQUIREMENTS FOR SPECIALIZED INSTITUTIONS.

  1. The Federal Securities & Investments Commission may establish reduced capital requirements for:
    1. Community development financial institutions;
    2. Banking entities primarily serving underbanked communities;
    3. Financial institutions focused on small business lending;
    4. Rural financial institutions.
  2. Such reduced requirements must not materially increase systemic risk or threaten depositor safety.
TITLE IV
STREAMLINING OF REGULATORY OVERSIGHT

9. UNIFIED REGULATORY EXAMINATION PROCESS.

  1. All prudential examinations of banking entities shall be consolidated under a single examination framework.
  2. This unified examination process shall:
    1. Replace separate examinations by multiple regulatory agencies;
    2. Follow a risk-based scheduling approach;
    3. Focus supervisory resources on institutions and activities posing the greatest risk;
    4. Utilize standardized examination protocols;
    5. Provide timely and actionable feedback to examined institutions.

10. SIMPLIFIED REPORTING REQUIREMENTS.

  1. The Department of Treasury and the Federal Bank of Nouvelle Alexandrie shall jointly establish a simplified regulatory reporting framework that:
    1. Eliminates duplicative or unnecessary reporting requirements;
    2. Standardizes definitions and formats across agencies;
    3. Utilizes modern data collection technologies;
    4. Ensures the continued availability of necessary supervisory information.
  2. Small banking institutions with assets below €500 million shall benefit from:
    1. Reduced reporting frequency;
    2. Simplified reporting forms;
    3. Extended filing deadlines.
TITLE V
FINANCIAL INNOVATION SANDBOX PROGRAM

11. ESTABLISHMENT OF REGULATORY SANDBOX.

  1. There is hereby established the Financial Innovation Sandbox Program under the joint authority of the Federal Securities & Investments Commission and the Federal Bank of Nouvelle Alexandrie.
  2. The Sandbox Program shall:
    1. Provide a controlled testing environment for innovative financial products, services, and business models;
    2. Allow temporary relief from certain regulatory requirements;
    3. Facilitate dialogue between innovators and regulators;
    4. Support responsible innovation in financial services.

12. SANDBOX PARTICIPATION.

  1. Eligible entities may apply to participate in the Sandbox Program if they:
    1. Offer genuinely innovative financial products or services;
    2. Demonstrate potential consumer or market benefits;
    3. Have conducted appropriate risk assessments;
    4. Possess adequate resources to participate;
    5. Establish appropriate safeguards for consumers and the financial system.
  2. Participation shall be limited to:
    1. A maximum period of twenty-four AN (24) months;
    2. Appropriate customer limits;
    3. Regular reporting requirements;
    4. Clear exit strategies.
TITLE VI
ENHANCED CONSUMER PROTECTION

13. TRANSPARENCY IN FINANCIAL PRODUCTS.

  1. All providers of consumer financial products or services shall:
    1. Provide standardized disclosure documents in plain language;
    2. Clearly state all fees, penalties, and charges;
    3. Explain material risks associated with the product or service;
    4. Maintain accessible customer service channels for inquiries and complaints.
  2. The Federal Securities & Investments Commission shall establish model disclosure forms for common financial products and services.
TITLE VII
SYSTEMIC RISK MANAGEMENT

14. SYSTEMIC RISK COUNCIL.

  1. There is hereby established the Systemic Risk Council, consisting of:
    1. The Secretary of the Treasury, who shall serve as Chairperson;
    2. The Governor of the Federal Bank of Nouvelle Alexandrie;
    3. The Chairperson of the Federal Securities & Investments Commission;
    4. The Director of the Consumer Financial Protection Office;
    5. Three (3) independent members appointed by the President of the Government for four-year terms, subject to confirmation by the Federal Assembly.
  2. The Council shall:
    1. Identify and monitor risks to financial stability;
    2. Respond to emerging threats to financial stability;
    3. Promote market discipline by eliminating expectations of government bailouts;
    4. Require enhanced prudential standards for systemically important financial institutions.

15. RESOLUTION AUTHORITY.

  1. The Federal Securities & Investments Commission, in consultation with the Federal Bank of Nouvelle Alexandrie, shall establish a framework for the orderly resolution of failing financial institutions that:
    1. Minimizes impact on financial stability;
    2. Protects depositors;
    3. Prevents taxpayer-funded bailouts;
    4. Imposes losses on shareholders and unsecured creditors;
    5. Removes culpable management.
  2. Systemically important financial institutions shall be required to develop and maintain resolution plans ("living wills") that detail how they could be resolved in an orderly manner during financial distress.
TITLE VIII
FINAL PROVISIONS

16. IMPLEMENTATION AND ENFORCEMENT.

  1. The Federal Securities & Investments Commission, the Federal Bank of Nouvelle Alexandrie, and the Department of Treasury shall jointly issue regulations to implement the provisions of this Act within one hundred and eighty (180) days of its enactment.
  2. The Federal Securities & Investments Commission shall be the primary enforcement agency for violations of this Act, with authority to:
    1. Conduct investigations;
    2. Issue cease and desist orders;
    3. Impose civil monetary penalties;
    4. Refer criminal violations to the Department of Justice.

17. PREEMPTION OF REGIONAL LAW.

  1. The provisions of this Act shall supersede any Regional law that conflicts with its requirements.
  2. Regions may impose additional requirements on banking entities headquartered within their jurisdiction, provided such requirements do not:
    1. Conflict with federal law;
    2. Discriminate against out-of-region banking entities;
    3. Impose an undue burden on interstate commerce.

18. SEVERABILITY.

  1. If any provision of this Act or the application thereof to any person or circumstance is held invalid, the remainder of the Act and the application of such provision to other persons or circumstances shall not be affected thereby.

19. EFFECTIVE DATE.

  1. This Act shall take effect on the first day of the eighth month following its enactment.

Amendments

Voting Record

Member Region Party Vote Comments
[Member 1] [Region] [Party] [Yea/Nay/Abstain] [Optional comment]
[Member 2] [Region] [Party] [Yea/Nay/Abstain] [Optional comment]

See also

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