WASHINGTON – Homeland Security and Governmental Affairs Committee Chairman Joe Lieberman, ID-Conn., and Ranking Member Susan Collins, R-Me., Thursday explored the financial regulatory reform efforts conducted by the United Kingdom, Australia, and Canada, as President Obama prepared to release his own proposal for reform.

The hearing, entitled “Where Were the Watchdogs? Financial Regulatory Lessons from Abroad,” was the third in a series examining the structure of our financial regulatory system, how that flawed structure contributed to the system’s failure to anticipate the current economic crisis, and what kind of reforms are needed to strengthen financial oversight in the future.

“As the President prepares his own proposal for financial regulatory reform, it makes sense to examine the experiences of other nations that have reformed their own structures,” Lieberman said. “As we do so, we must keep in mind that the underlying regulations and the overarching structure are tightly interwoven, and that if we want to minimize the likelihood of severe financial crises in the future, we need to reform our regulations and improve the architecture of our financial regulators.”

Collins said, “We can learn some valuable lessons from studying the best practices of other countries. Canada’s banking system, for example, has been ranked as the strongest in the world, while ours is ranked only 40th. Based on our Committee’s prior hearings and after consulting with a wide range of financial experts, I introduced the Financial System Stabilization and Reform Act, which would fundamentally restructure our financial regulatory system, help restore stability to our financial markets, and begin to rebuild the public confidence in our economy.”

The Financial System Stabilization and Reform Act would establish a Financial Stability Council that would be charged with identifying and taking action to prevent or mitigate systemic threats to our financial markets. The Council would help ensure that high-risk financial products and practices could be detected in time to prevent their contagion from spreading to otherwise healthy financial institutions and markets.

The Committee’s previous hearings showed that our current regulatory system evolved in a haphazard manner over the last 150 years — largely in response to whatever the latest crisis was to hit our nation and threaten its financial stability.

As a result, our financial regulatory system is both fragmented and outdated. Numerous federal and state agencies share responsibility for regulating financial institutions and markets, creating redundancies and gaps over significant activities and businesses such as consumer protection enforcement, hedge funds, and credit default swaps. Our current crisis has clearly exposed many of these problems.

Over the past few years the United Kingdom, Australia, and a number of other countries have dramatically reformed their financial regulatory systems. They have merged agencies, reconsidered their fundamental approaches to regulation, and streamlined their regulatory structures. Many experts believe that these reforms have resulted in a more efficient use of regulatory resources and more clearly defined roles for regulators. And even though the U.S. economy is vastly different in size and scope from all others, there is still much we can learn by studying the examples of our free market partners.

Testifying about their nations’ reforms were David Green, former Head of International Policy at the UK’s Financial Services Authority; Jeffrey Carmichael, the inaugural chairman of the Australian Prudential Regulation Authority, which had responsibility for regulating and supervising banks, insurance companies and pension funds; Edmund Clark, President and CEO of the TD Bank Financial Group in Canada,the fifth largest bank in North America; and David Nason, a key contributor to the Treasury Department’s March 2008 Blueprint for a Modernized Financial Regulatory Structure.