The Fed’s Michael Barr outlines his priorities for making the financial system safer and fairer

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In his first speech On Wednesday, as Federal Reserve Vice Chairman for Oversight, Michael Barr outlined his priorities for making the financial system safer and fairer for consumers.

Barr completed his remarks with a vision of tighter regulation for bank merger assessments, as potential risks such as reduced competition and access to financial services by raising prices loom.

“These risks can be difficult to assess, but this consideration is critical,” the new chief regulatory officer said during an event at the Brookings Institution. “I’m working with Federal Reserve staff to assess how we’re doing merger analysis and where we can do better.”

Barr added that he will talk more about possible adjustments to bank capital requirements in the fall, including the additional leverage ratio, countercyclical capital buffer and stress tests.

“An important principle of the capital framework is that it should evolve through a continuous process of incorporating new risks that may emerge,” he said, noting that banks’ capital reviews aim to ensure that Capital levels are strong enough in the event of an economic shock. .

Barr, meanwhile, raised concerns about the lack of regulation of stablecoins, which are digital tokens pegged to the value of a more “stable” asset. “Stablecoins, like other unregulated private currencies, could pose risks to financial stability,” he warned.

“Congress should work quickly to pass much-needed legislation to bring stablecoins, especially those designed for use as a means of payment, within the prudential regulatory perimeter.”

Elsewhere, as depository institutions focus on the risks climate change poses to their balance sheets, the Fed plans to launch a pilot exercise in 2023 requiring banks to examine how climate change bodes well for their finances, Barr explained.

In mid-July, the Senate confirms Michael Barr as the Fed’s chief Wall Street regulator.


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Don F. Davis