US Treasury calls for law promoting regulator and financial firm ‘partnerships’

The recommendation came in a report ordered by President Trump on the future of US financial regulation.

The US Treasury has said that in order to develop a more “agile” regulatory landscape, Congress should change laws preventing firms – including those in private equity – from sharing their technology with regulators. It also said that agencies should “seek out innovative partnerships with financial services companies” so they can do a better job.

The call came in a report covering non-bank entities, financial firms and the fintech sector – the fourth and final in a series ordered by President Trump last year as part of an examination of all US financial system regulation.

The Treasury report said that while many firms are willing to provide regulators with new technology “in order to demonstrate viability or to help expedite the regulatory process, federal regulators may be precluded from accepting such offers.” It said this should change and that regulators “need to understand technology on the same timeline as business.”

The report also recommended that regulators lean more heavily on the business they are regulating for direction, saying that “using the expertise of the private sector in developing regulatory tools will generally produce more optimal solutions than restricting input to be entirely in-house.” The Treasury added that enabling regulators to use new financial technology created by firms could “improve the execution of their own regulatory responsibilities” and that regulators should not “create unnecessary barriers to innovation.”

The report signals a further relaxation of the regulatory stance toward financial services firms and businesses, continuing a tone that President Trump has set since he assumed office. On data sharing, the report called for the removal of “legal and regulatory uncertainties holding back financial services companies from establishing data-sharing agreements.”

The Treasury also said regulators should not “impose unnecessary burdens or obstacles to the use of AI [artificial intelligence] and machine learning” and that any barriers to the deployment of AI-powered technologies should be removed, but it did not identify those barriers.

The report additionally called for the creation of a “regulatory sandbox” where businesses can experiment – free from existing regulations – in a “customized” regulatory environment. The Treasury said Congress should consider legislation to make this a reality if it proves too difficult under current regulatory structures.

The report struck a note of caution on international cooperation around regulation, saying that it would be “premature” to develop international regulatory standards for the financial technologies and approaches it is seeking to promote.