Don’t hold your breath just yet, but I think the US Administration may be getting ready to announce the new primary regulator for the banking industry – the Federal Reserve! There are also a few more moves being telegraphed ahead of tomorrow’s announcement.

Rumor has it that the Office of Thrift Administration will be rolled up into a new “National Bank Supervisor” agency. Last but certainly not least is the proposed establishment of a Consumer Financial Protection Agency that will be responsible for reviewing and approving mortgage products and creating new disclosure rules for home loans.

When I first posted on this subject a few weeks ago I obviously hit a nerve as many of my colleagues started to postulate on who or what the new regulator would be. Not one person speculated that it could turn out to be the FRB. I for one believe this to be a natural role for the Federal Reserve as they have the experience, infrastructure and existing complimentary responsibilities. They also act somewhat at arms length from the government, which is a good thing for banking (can you say TARP without wincing?). According to one administration insider, “this will establish the Federal Reserve as a consolidated supervisor of large systemically significant financial institutions that will require higher capital standards and more scrutiny of their activities because of the risk to the system of their collapse”. Like it or not I suspect that this is just the start of a much more tightly regulated US banking industry and now that we know the “who” maybe the prospects of the “what” won’t seem so scary.

I still maintain that this could mean changes in the way that banks manage and account for hard currency assets. As for me – I’m sitting on my mattress, protecting my personal information, counting my diminishing funds and waiting for the next shoe to drop!