September 7, 2022

New FRB Vice Chair for Supervision Highlights Priorities

Steven Lofchie Commentary by Steven Lofchie

Recently sworn in Federal Reserve Board ("FRB") Vice Chair for Supervision Michael S. Barr highlighted the need to "build" and not just "maintain" safe and fair financial markets.

In a speech at the Brookings Institution, he offered his perspective on capital, resolution, bank mergers, stablecoins, climate change, innovation and consumer protection and community reinvestment. Among his observations:

  • bank regulatory capital and other regulatory requirements should be significantly tiered as the failure of a big bank has greater impact than that of a community bank;

  • there should be closer review of bank mergers to assure that they do not reduce competition; and

  • the FRB is working with other bank regulators to provide guidance to large banks on how to manage the financial risks of climate change.

Mr. Barr also stated that he favors greater regulation of stablecoins, arguing that unregulated private money could pose "financial stability risks." He expressed concern as to whether banks engaging in crypto activity were fully managing the risks. Mr. Barr emphasized that "we need to focus on access to fast, efficient digital payments. . . Low income households can ill afford to wait days for their income checks to clear, nor can small businesses."

Commentary

On stablecoins, Mr. Barr left the impression that he would prohibit private stablecoins, and require that they be issued only by or through banks. He did not discuss whether the United States should issue a central bank digital currency, though that could be taken as an implication of his remarks. On climate change, Mr. Barr struck a measured and deliberate tone, saying that the FRB is "working to understand" and is planning an "exercise to better assess the long-term, climate related financial risks facing the largest institutions."

Email me about this

Premium Content

Available only to Premium subscribers.

 

Tags