WASHINGTON Jan 23 (Reuters) - The U.S. financial regulatory system remains fragmented two and a half years after Congress passed the Dodd-Frank law, and time-consuming coordination among regulators has stalled its biggest reforms, a government watchdog said in a report on Wednesday.
The U.S. Government Accountability Office said that as of December, regulators had finished fewer than half of the new rules called for by the 2010 law, which lawmakers crafted in response to the 2007-2009 U.S. financial crisis.
The Dodd-Frank law gave regulators new oversight of the $650 trillion over-the-counter swaps market, called for tough new rules to prevent banks from speculating with their own money, and sought to end "too big to fail" by creating a path for regulators to wind down giant, failing banks.
The complexity and interconnected nature of some required rules has caused regulators to get behind, as has the coordination required for multiple agencies to agree on joint rules.
Also, Dodd-Frank did little to streamline the overlapping organizational chart of financial regulation, which includes numerous federal and state supervisors, the GAO observed.
"The implementation of many of these reforms remains ongoing and the effectiveness of some remains an open question," the GAO said. The group consulted private and regulatory data and interviewed regulators to compile the report. It did not make specific recommendations.
Financial regulators have pushed out dozens of new rules called for by Dodd-Frank, but they are behind on some of the biggest changes.
A controversial ban on proprietary trading known as the "Volcker rule" was supposed to take effect in July 2012.
The five agencies responsible for the rule -- the Securities and Exchange Commission, Federal Reserve, Commodity Futures Trading Commission, Federal Deposit Insurance Corp and Office of the Comptroller of the Currency -- have not finished writing it.
Officials also have not spelled out how new U.S. rules for swaps trades would apply overseas. Nor have they designated any non-bank financial firms for heightened supervision or implemented an international agreement requiring banks to hold more capital.
Some rules have been held up while regulators waited for other agencies to craft similar rules. And the GAO said other regulations require coordination among agencies and with international regulators, which can be time-consuming.
"Although regulators have established mechanisms to facilitate coordination and believe coordination efforts have improved the quality of the rulemakings, several regulators indicated that coordination increased the amount of time needed to finalize rulemakings," the report said.
Elisse Walter, chairman of the Securities and Exchange Commission, said in response to the report that implementing Dodd-Frank has been a "major undertaking" but that the SEC has made considerable progress implementing the law.