U.S. Financial Sector Can Expect "Profound" Changes, Says IMF

New regulations and legislation could be a shock to the system


The International Monetary Fund predicted "profound" changes in the U.S. financial sector as a result of new regulations, according to a report released on Tuesday.

New rules for banks, money-market mutual funds, securitization, and over-the-counter derivatives will bring big changes to the sector, the IMF said in an analytical chapter of its Global Financial Stability Report. Many of these are part of the 2010 Dodd-Frank financial reform law. Regulators tasked with the law's implementation are still developing many of the rules.

"Because many of the new rules remain under development, predicting their impact on the structure of the financial sector is difficult," the report said. "Nevertheless, profound changes are likely, as investment banking becomes less profitable and the costs of running OTC [over-the-counter] derivative and securitization businesses rise."