The U.S. Securities and Exchange Commission will delay rules for the derivatives markets and will have only a "skeleton crew" tracking hedge funds if it doesn't receive a 2012 budget increase, Chairman Mary Schapiro said.
"The new responsibilities assigned to the agency under the Dodd-Frank Act are so significant that they cannot be achieved solely by wringing efficiencies out of the existing budget," Schapiro said in testimony prepared for a hearing of the Senate Banking Committee on the anniversary of Dodd-Frank enactment tomorrow.
Citing its many new duties under Dodd-Frank, Schapiro requested a $1.4 billion 2012 budget for her agency after a 2011 budget debate resulted in a $74 million increase to $1.2 billion. A budget bill crafted by House Republicans would keep the SEC at its current spending level next year.
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In the SEC's new responsibility to oversee security-based swaps, Schapiro said, market participants will face "further delays and uncertainty" without more staff to process registration requests. A "handful of staff" would monitor 750 advisers to hedge funds and private-equity funds.
At the same Dodd-Frank hearing, Federal Deposit Insurance Corp. Acting Chairman Martin J. Gruenberg will tell lawmakers that banks deemed too big to fail must hold additional capital requirements to cushion any losses during a failure and minimize any reliance on the government for bailouts.
"Capital allows an institution to absorb large unexpected losses while maintaining the confidence of its counter parties and continuing to lend," Gruenberg said in testimony prepared for the committee. "Strong capital minimizes the likelihood that large institutions will become troubled and need to be resolved in some way by the federal government during an economic downturn."
The agency expects to report in its second-quarter results next month that the deposit insurance fund balance will be positive. The fund stood at a negative $1 billion as of the first quarter this year.
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